PETRA DIAMONDS
LIMITED
13 September 2022 |
LSE:
PDL |
Preliminary
Results for FY 2022 (unaudited)
Record results and
a significant turnaround in Petra’s net debt
Petra announces its preliminary results (unaudited) for the year
ended 30 June 2022 (Year or FY 2022).
Separate announcement on the 2026 Loan Notes Tender offer issued
today.
Financial highlights
- Revenue up 44% to US$585
million
- Doubling of adjusted EBITDA to US$265
million
- Adjusted basic earnings per share up 219% to USc42.93
- Operational free cash flow up 91% to US$230 million
- Consolidated net debt of US$40.6
million, with leverage of 0.15x
Enabling
- Launch of US$150 million tender
offer to reduce gross debt
- Announcement of dividend policy
Richard Duffy, Chief Executive
Officer of Petra, commented:
“We are delighted with our overall
performance, which caps the turnaround begun three years ago. Our
continued focus on safety has supported a 48% improvement in our
LTIFR. Additionally, sustainability is being integrated across our
business through the implementation of our new Sustainability
Framework. Project 2022, now concluded, has delivered US$265 million in net free cash over its three
years, contributing to our record financial results for FY2022.
In addition to Project 2022, the key drivers were our record
recovery of Exceptional Stones[1], the
resumption of operations at the Williamson mine, and a 41.5%
increase in like-for-like[2] diamond prices.
The diamond market remains broadly supportive as a result of the
prevailing structural supply deficit, although ongoing
macro-economic uncertainties may lead to some volatility in the
short term.
Our strong cash generation in FY 2022
has enabled us to target a further reduction in our gross debt
through a tender offer for US$150
million of our 2nd lien notes, detailed in a
separate release today. This will see us saving up to US$15 million annually in interest expenses.
I am also very pleased to announce
that, on the back of our much improved financial position, the
Board has approved a dividend policy.”
HIGHLIGHTS
Strong financial performance driving
the reduction in consolidated net debt
US$m unless stated
otherwise |
FY
2022 |
|
FY
20212 |
Variance |
Revenue |
585.2 |
|
406.9 |
+44% |
Adjusted
EBITDA1 |
264.9 |
|
130.2 |
+103% |
Adjusted EBITDA margin
(%)1 |
45% |
|
32% |
+44% |
Adjusted profit /
(loss) before tax1 |
141.9 |
|
(18.3) |
+875% |
Adjusted net profit /
(loss) after tax1 |
102.0 |
|
(25.5) |
+500% |
Net profit after
tax |
88.1 |
|
196.6 |
-55% |
Operational free
cashflow1 |
230.0 |
|
120.1 |
+91% |
Consolidated net
debt1 |
40.6 |
|
228.2 |
-82% |
Unrestricted cash |
271.9 |
|
147.7 |
+84% |
Consolidated net debt
: Adjusted EBITDA1 |
0.15x |
|
1.75x |
-91% |
Basic earnings per
share (USc) |
35.53 |
|
260.70 |
-86% |
Adjusted basic
earnings / (loss) per share1 (USc) |
42.93 |
|
(36.20) |
+219% |
Note 1: For all non-GAAP measures
refer to the Summary of Results table within the Financial Results
section below.
Note 2: For comparative purposes, the
FY 2021 income statement figures include Williamson as it is no
longer a discontinued operation – refer to note 2. Consolidated net
debt and cash balances for FY 2021 have not been adjusted.
Note 3: The comparative basic profit
per share and adjusted profit per share have been adjusted to give
effect to the share consolidation of one new share for every 50
existing shares completed on 29 November
2021 with the Company’s resultant issued share capital now
consisting of 194,201,785 ordinary shares of 0.05 pence each.
- FY 2022 total revenue of US$585.2
million comprises revenue from rough diamond sales of
US$584.1 million and additional
revenue from profit share agreements on partnership stones of
US$1.1 million. The 44% increase in
revenue from rough diamond sales was driven by:
- A 41.5% increase in year-on-year like-for-like prices
- The contribution from the sale of a record number of
Exceptional Stones of US$89.1
million; this compares with an average of US$39.2 million over the last five years
- Adjusted EBITDA rose 103% to US$264.9
million, reflecting the positive operational leverage from
our revenue growth, as well as improved efficiencies from Project
2022; Adjusted EBITDA margin rose to 45%
- Adjusted net profit after tax rose to US$102.0 million (reversing a US$25.5 million adjusted net loss after tax last
year). Net profit after tax fell 55% to US$88.1 million largely driven by a prior year
gain of US$213.3 million on the
extinguishing of the Notes as part of the Group’s capital
restructuring, and unrealised foreign exchange losses of
US$34.3 million net of tax (FY 2021
unrealised gain of US$54.7 million
net of tax)
- Adjusted basic earnings per share was USc42.93 up 219%
- Operational free cash flow rose 91% to US$230.0 million driven by increased EBITDA
- Consolidated net debt reduced 82% to US$40.6 million which is 0.15x EBITDA, reflecting
this strong free cash flow generation
Efficient production with excellent
safety performance and a focus on sustainability
|
|
FY
22 |
FY
211 |
Variance |
LTIFR |
|
0.23 |
0.44 |
+48% |
LTIs (number) |
|
15 |
25 |
+40% |
Ore processed
(Mt) |
|
11.7 |
8.1 |
+44% |
Diamonds recovered
(carats) |
|
3,353,670 |
3,240,312 |
+3% |
Rough diamonds sold
(carats) |
|
3,536,316 |
3,960,475 |
-11% |
Revenue from rough
diamond sales (US$m) |
|
584.1 |
406.9 |
+44% |
Adjusted mining and
processing costs (US$m) |
|
307.1 |
276.1 |
+11% |
Capital expenditure
(US$m) |
|
52.2 |
22.8 |
+129% |
Note 1: For comparative purposes, the
FY 21 production, diamond sales and cost figures have been restated
to include Williamson as it is no longer a discontinued
operation
- LTIFR improved 48% to 0.23, and LTIs improved 40% to 15
including an LTI which occurred during FY 2022 but was recorded
post year-end
- Production increased 3% to 3,353,670 carats, largely owing to
the resumption of mining at Williamson
- Cash-on-mine costs remained within guidance despite
inflationary pressures
- Capital expenditure, which comprises expansion and sustaining
capex, was below guidance largely attributable to expenditure of
around US$12 million being deferred
from FY 2022 to FY 2023
- Our new Sustainability Framework is being fully integrated into
Petra’s operating model. Sustainability targets will be
detailed in the FY 2022 Sustainability Report in October
- Petra is targeting zero greenhouse gasses (GHG) emissions on a
net basis by 2050. This commitment includes an aspirational goal to
reach net-zero emissions for Scope 1 and 2 GHG by 2040 or earlier.
Additional details will be provided in the Annual Report and
Sustainability Report in October
Key operational guidance
maintained
|
|
FY
23E |
FY
24E |
FY
25E |
Total carats recovered
(Mcts) |
|
3.3 –
3.6 |
3.3 –
3.6 |
3.6 –
3.9 |
Cash on-mine costs and
G&A1 (US$m) |
|
300 –
320 |
300 –
320 |
300 –
320 |
Expansion
capex1(US$m) |
|
115 –
125 |
125 –
135 |
115 –
120 |
Sustaining
capex1(US$m) |
|
33 –
36 |
30 –
32 |
26 –
28 |
Note 1: Opex and capex guidance is
stated in FY 22 real terms and based on an exchange rate of
ZAR15 / USD1.
More detailed guidance is available on Petra’s website at
https://www.petradiamonds.com/investors/analysts/analyst-guidance/
Petra reaffirms its operational guidance provided for the FY
2023 to FY 2025 period, noting the following:
- While Cullinan Mine recorded lower grades towards the end of
the Year, a study is underway to inform our mine planning as a
result of a higher proportion of ROM tonnes from our more mature
drawpoints
- The impact of waste dilution on grades experienced at Finsch in
Q4 FY2022 has continued into Q1 of this year, with ongoing
monitoring and mitigation plans to address this
- Options for a responsible exit at Koffiefontein, including the
evaluation of non-binding expressions of interest.
New dividend policy
The Board approved a dividend policy targeting an ordinary
dividend within the range of 15% to 35% of adjusted free cash
flows after interest and tax and having adjusted for any windfall
earnings.
The Board would ordinarily look to the annual dividend being
paid 1/3 following its interim results and 2/3 after its full year
results. The dividend policy will take effect from 1 July 2022 and the Board will consider whether
to pay a maiden dividend under this policy following publication of
Petra's interim results for the six months ending 31 December 2022. In a year where Petra generates
windfall earnings, the Board may consider paying a special
dividend.
Prior to declaring or recommending any dividend, the Board will
consider the Group’s capital commitments, including, amongst other
things, approved expansion projects and debt servicing and
repayment commitments and associated covenant requirements, to
ensure that the Group maintains a healthy balance sheet and
sufficient liquidity and headroom.
Debt tender offer
Petra today also announced its intention to reduce its gross
debt through a tender offer to bondholders to purchase US$150 million of the Senior Secured Second Lien
Notes due in 2026 in line with our stated intent to further
optimise our capital structure through a reduction of gross
debt. If completed, the transaction will see Petra saving up
to US$15 million per annum in
interest expenses, while we remain confident that we will continue
to fund our ongoing capital programmes from existing and internally
generated cash resources. Further detail on the tender offer is
covered in a separate announcement which can be found on Petra’s
website at https://www.petradiamonds.com/investors/news/
Outlook
FY2023 - 2025 production, cost and capex guidance remains
unchanged. We continue to monitor the evolving macro-economic
environment that has seen higher inflation and interest rates. Our
ability to absorb inflationary pressures is assisted by our
disciplined cost management, relatively low fuel consumption, and
any weakening of the South African Rand.
The backdrop of structural changes to the supply and demand
fundamentals in the diamond market remains unchanged and we
anticipate that it will continue to be supportive going forward,
notwithstanding possible volatility in the short term.
The implementation of our new operating model, that formed part
of Project 2022, has provided a more stable and resilient operating
platform supporting ongoing cash generation, enabling our
self-funded expansion programme, the US$150
million tender offer for our 2nd lien notes and
the potential payment of dividends under our new dividend
policy.
PRESENTATION DETAILS
Richard Duffy, CEO, Jacques Breytenbach, CFO, will present the
results to investors and analysts.
Online and in person at 09.30 BST
In-person: One Heddon Street,
London, W1B 4BF
Webcast: To join
https://stream.brrmedia.co.uk/broadcast/630f7aa6da906b287e9a3218
Online only at 16.00 BST
Webcast: To join
https://stream.brrmedia.co.uk/broadcast/630f7c97da906b287e9a335f
Dial in details for both 09:30 BST
and 16:00 BST
- Johannesburg, toll/tollfree:
+27 (0) 11 589 8302 / 0800 980 512
- UK: +44 (0)33 0551 0200
- New York: +1 212 999 6659
Password: Quote PetraDiamonds when prompted by the
operator
Recording of presentation
A recording of the webcast will be available later today on
Petra’s website at
https://www.petradiamonds.com/investors/presentations
Investor Meet company presentation 11.30 BST
Petra will present the results on the Investor Meet company
platform, predominantly aimed at retail investors. To join:
https://www.investormeetcompany.com/petra-diamonds-limited/register-investor
FURTHER INFORMATION
Petra Diamonds,
London
+44 207 494 8203
Patrick
Pittaway
investorrelations@petradiamonds.com
Jill Sherratt
Julia Stone
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is being
released on behalf of Petra by the Company Secretary.
ABOUT PETRA DIAMONDS
Petra Diamonds Limited is a leading independent diamond mining
group and a consistent supplier of gem quality rough diamonds to
the international market. The Company has a diversified portfolio
incorporating interests in three underground producing mines in
South Africa (the Finsch, Cullinan
and Koffiefontein Mines) and one open pit mine in Tanzania (Williamson).
Petra's strategy is to focus on value rather than volume
production by optimising recoveries from its high-quality asset
base in order to maximise their efficiency and profitability. The
Group has a significant resource base of 226.6 million carats,
which supports the potential for long-life operations.
Petra strives to conduct all operations according to the highest
ethical standards and will only operate in countries which are
members of the Kimberley Process. The Company aims to generate
tangible value for each of its stakeholders, thereby contributing
to the socio-economic development of its host countries and
supporting long-term sustainable operations to the benefit of its
employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the
London Stock Exchange under the ticker 'PDL'. The Company’s
US$336.7 million Senior Secured
Second Lien Notes due in 2026 are listed on the Irish Stock
Exchange and admitted to trading on the Global Exchange Market. For
more information, visit www.petradiamonds.com
CEO’S REVIEW
Strong revenue growth, profitability
and cash generation in a robust diamond market
US$m unless otherwise
stated |
FY
22 |
FY
21 |
Variance |
Sales |
|
|
|
Rough diamonds sold
(carats) |
3,536,316 |
3,960,475 |
-11% |
Revenue from rough
diamond and partnership sales |
585.2 |
406.9 |
+44% |
Contribution to rough
revenue from Exceptional Stones |
89.1 |
62.0 |
+44% |
Profitability |
|
|
|
Adjusted
EBITDA1 |
264.9 |
130.2 |
+103% |
Adjusted EBITDA margin
(%) |
45 |
32 |
+44% |
Cash
generation |
|
|
|
Operational free cash
flow1 |
230.0 |
120.1 |
+91% |
Consolidated net
debt1 |
40.6 |
228.2 |
-82% |
Unrestricted cash |
271.9 |
147.7 |
+84% |
Note 1: For all non-GAAP measures
refer to the Summary of Results table within the Financial Results
section below.
Note 2: For comparative purposes, the
FY 2021 income statement figures include Williamson as it is no
longer a discontinued operation – refer to note 2. Consolidated net
debt and cash balances for FY 2021 have not been adjusted.
Overall revenue increased 44% to US$585.2
million, comprising US$584.1
million from rough diamond sales and an additional
US$1.1 million from our first
partnership stone sale. The drivers of this revenue growth were the
year-on-year 41.5% increase in like-for-like diamond prices and
record recovery and sale of Exceptional Stones, totalling
US$89.1 million (FY 2021:
US$62.0 million).
The 11% reduction in rough diamonds sold reflects the
particularly high volumes sold in FY 2021, mostly off-tender, as
the inventory build-up after the initial COVID-19 outbreak was
released.
Adjusted EBITDA rose 103% to US$264.9
million with an Adjusted EBITDA margin of 45% reflecting the
strong revenue growth and positive operational leverage, supported
by the recovery of Exceptional Stones.
The 91% improvement in operating free cash flow generation has
been supported by the Project 2022 initiatives. Over the three
years since its commencement the Project has contributed
US$265.4 million of net free cash
flow benefits, exceeding our revised target of delivering net free
cash flow of between US$100 million
and US$150 million.
This cash generation means that we lowered our consolidated net
debt to US$40.6 million as at
30 June 2022, down from US$228.2 million as at 30
June 2021.
Safe and efficient production
|
|
FY
22 |
FY
211 |
Variance |
LTIFR |
|
0.23 |
0.44 |
-48% |
LTIs |
|
15 |
25 |
-40% |
Ore processed
(Mt) |
|
11.7 |
8.1 |
+44% |
Diamonds recovered
(carats) |
|
3,353,670 |
3,240,312 |
+3% |
Adjusted mining and
processing costs (US$m) |
|
307.1 |
276.1 |
+11% |
Capital expenditure
(US$m) |
|
52.2 |
22.8 |
+129% |
Note1: For comparative purposes, the
FY 21 production and cost figures have been restated to include
Williamson as it is no longer a discontinued operation
We strive to achieve a zero-harm working environment.
Petra has focused on improving safety performance through remedial
actions and behaviour-based intervention programmes. As a result,
we have improved the Lost Time Injury Frequency Rate (LTIFR) by 48%
to pre-pandemic levels, and Lost Time Injuries (LTIs) by 40% which
were of low severity and mostly behavioural in nature. We continue
the roll-out of COVID-19 vaccinations for employees and 64% of the
workforce in South Africa and 15%
of the workforce in Tanzania have
been vaccinated. The vaccination rate in South Africa is well ahead of the national
average of 51%.
The vast majority of the 44% increase in ore processed is
attributable to Williamson recommencing operations in August 2021 following a 17-month period of care
and maintenance. Williamson ore is lower grade in comparison to our
South African mines and this translated into a 3% increase in
diamonds recovered, within our guidance range.
Project 2022 has, as part of the focus on cash generation, been
highly effective in addressing both operational efficiencies as
well as the efficiency of our operational and capital expenditure.
We have created a Business Improvement function to ensure that the
systems and processes developed as part of Project 2022, which
concluded this Year, will continue to deliver benefits and seek out
further improvement opportunities. Supporting this culture of
continuous improvement, our new operating model has clarified lines
of accountability and further empowers our people.
Cash on-mine costs and G&A costs were in line with guidance.
The 11% increase in adjusted mining and processing costs was
principally due to the resumption of operations at Williamson
during the first quarter of the Year, the stronger average ZAR/USD
exchange rate and inflationary increases.
Group capex of US$52.2 million was
below guidance following delayed delivery of certain capital items
planned for FY 2022 due to increased lead-times. As a result,
around US$12 million of capex that
was due to be incurred in FY 2022 is now expected to be incurred in
FY 2023. US$34.5 million of the FY
2022 capital spend was expansionary capex and the vast majority of
total capex was invested at the Cullinan and Finsch Mines
(US$35.0 million and US$12.0 million respectively).
Load shedding and energy reform in
South Africa
The recent increase in load shedding in South Africa is currently having minimal
impact on our operations. Our excess processing capacity at both
Cullinan Mine and Finsch allows us to reduce our processing energy
draw to meet the prescribed load curtailment requirements whilst
maintaining mining at full production and catching up on processing
when conditions return to normal.
The regulator in South Africa
has increased the allowance for self-generation without requiring a
generation licence to a maximum of 100 MW. This has opened up
opportunities for high energy-users to integrate renewables on
their own sites and Petra is actively looking at options that are
optimal from a financing and partnering perspective that would
enable us to integrate renewables into our energy mix, lower our
cost of energy, secure our energy supply and support our target of
achieving net zero GHG emissions by 2050 or earlier.
Extending our mine plans
Resources
Petra manages one of the world’s largest gross diamond resources
(inclusive of reserves) of 226.6 Mcts, supporting a potential
mine life well beyond the current mine plans. The 2% reduction
compared to 230.64 Mcts in 30 June
2021, was predominantly due to depletions resulting from
mining at all our assets in FY 2022.
Petra’s gross diamond reserves decreased 10% to 29.97 Mcts
(30 June 2021: 33.33 Mcts) primarily
due to mining depletions with minor changes in mine plans and
Williamson remaining on care and maintenance until August 2021.
Life extension projects approved
during the Year
As announced previously, the Board approved extension projects
at our major South African mines, the Cullinan and Finsch Mines,
during the Year.
- At the Cullinan Mine we will establish a CC1 East sub-level
cave, on the same level as the current C-Cut operation, extending
the mine plan to 2031. The capital investment is estimated at
US$173 million over the life of the
project and is expected to deliver a project internal rate of
return (IRR) of more than 30% and incremental project NPV of more
than US$70 million. Capital
expenditure began during the Year and production is expected to
begin in FY 2024, ramping up to a steady state in FY 2026.
- At Finsch, we will extend the mine below the current area,
creating a Lower Block 5 3-level sub-level cave, extending the mine
plan to 2030. The capital investment is estimated at US$216 million and the IRR is also expected to be
in excess of 30% with incremental NPV of more than US$90 million. Capital expenditure for this
project will commence during FY 2023 and we expect production to
commence in FY 2025.
- The capex involved in these projects is expected to be
self-funded.
There are further opportunities beyond these mine extension
plans, given the significant scale of the orebodies at the
Cullinan, Williamson and Finsch Mines.
Diamond market remains buoyant despite
uncertainties
Despite significant global economic uncertainties resulting from
the war in Ukraine, like-for-like
rough diamond prices increased 41.5% for the Year, driven in
particular by record jewellery retail demand in the US. Overall we
saw strength of demand across our product mix, both in white and
coloured gem-quality stones, with some increased demand for smaller
diamonds in the final tender of the Year in June.
Tender 1 FY 2023, announced today
We have achieved strong sales in the first tender of FY 2023,
realising US$102.9 million due to a
high proportion of high-value gem-quality single stones
particularly from the Cullinan Mine. This has resulted in a 21%
increase in our average realised price against Tender 6 in FY 2022,
more than offsetting the 4.5% softening of like-for-like
prices.
The supportive structural supply
deficit in the diamond market
Growth in demand was driven by mid-stream inventory restocking
and continued strong jewellery retail sales associated with a
delayed wedding boom and a growing trend in diamonds being given as
meaningful gifts post COVID-19. While the diamond market is strong,
macroeconomic uncertainties caused by the rise in inflation are a
potential dampener of demand.
Global supply is expected to remain broadly flat for the next
ten years at between 115 and 125 Mcts. This is driven by the
reduction in the number of producing mines, the long lead-times for
open-pit mines to transition to underground mining, as well as the
very limited investment in exploration. Given that less than 1% of
kimberlites discovered are economic, we do not expect this to
change in the medium term.
Sustainability performance to benefit
from new Sustainability Framework
|
FY
22 |
FY
211 |
Variance |
Carbon intensity
(tCO2-e/ct) |
0.139 |
0.126 |
+10% |
Energy intensity
(kWh/t) |
38.1 |
46.1 |
-17% |
Water intensity
(M3/t) |
1.0 |
0.55 |
+82% |
Women in the workforce
(%) |
20 |
20 |
flat |
Staff turnover
(%) |
9.8 |
9.6 |
+2% |
Training spend
(US$m) |
6.1 |
5.8 |
+5% |
Social spend
(US$m) |
0.9 |
0.7 |
+29% |
Note 1: FY 21 metrics are affected by
Williamson being on care and maintenance
The comparability of FY 2022 and FY 2021 performance is
distorted by the resumption of the open-pit operations at
Williamson in August 2021.
Petra is embedding its new Sustainability Framework so that
environmental, social and governance improvements are further
integrated throughout our operations. Targets will be published in
our FY 2022 Sustainability Report in October.
Petra remains committed to reducing our GHG profile and to
generate zero emissions on a net basis for Scopes 1 and 2
(emissions from sources we own and control directly and those
through the energy we purchase) by 2050, although we aspire to
reach this goal by 2040 or earlier. Our emissions profile is
heavily weighted to our Scope 2 emissions which comprise 97% of
total emissions in South Africa,
and 92% including Tanzania. We
will announce targets for 2030 in the FY 2022 Annual and
Sustainability Reports to be published in October. Our Scope 3
reductions will be pursued once our Scope 1 and 2 roadmap has been
developed. Our Climate Change Adaptation Strategy is being updated
in accordance with TCFD requirements.
Framework Agreement with the
Government of Tanzania and MOU
with Caspian
In December 2021, Petra announced
that it had entered into two agreements with the objective of
reducing its exposure to Tanzania
while still retaining control of Williamson.
The Framework Agreement between Petra and the Government of
Tanzania will become effective
after a number of conditions are satisfied, including obtaining
various government approvals. The agreement, which will result in
the reduction of Petra’s indirect shareholding in Williamson
Diamonds Limited (WDL) from 75% to 63% and establish a sustainable
future for Williamson, is progressing and is now expected to become
effective in the first half of FY 2023.
Petra expects to further reduce its indirect shareholding in WDL
from 63% to 31.5% via a sale to Caspian Limited but with Petra
retaining a controlling interest in WDL as Petra have the
controlling vote on the WDL Board via its controlling interest in
the intermediate holding company. The transaction remains subject
to the parties first agreeing definitive transaction agreements and
then obtaining all necessary government, regulatory and lender
approvals which are also expected to be obtained in the first half
of FY 2023.
Independent Grievance Mechanism and
community projects at Williamson
Petra has implemented remedial programmes and initiatives and is
establishing the Independent Grievance Mechanism (IGM) to address
the historical allegations of human rights abuses at Williamson.
The second phase of engagements with the Government of Tanzania and local stakeholders on the IGM has
been completed and the focus is now on updating the IGM processes
and appointing the various organs that will make up the IGM, with
the current target for the IGM to become operational remaining Q4
of CY 2022.
While the IGM is still being finalised, a mechanism has been set
up to enable community members to confidentially and securely
register alleged historical human rights grievances. This mechanism
continues to receive grievances, with a significant amount of
grievances having been registered to date. As the IGM is not yet
operational (and therefore unable to start investigating these
grievances), it is too early to evaluate the merits of these
grievances.
A number of other initiatives are being put in place to provide
sustainable benefits to the communities located close to the mine,
funded by the £1 million Escrow account established by Petra.
Having completed all planned activities in Q1 CY 2022, the Gender
Based Violence initiative is now training young men as champions
and first responders and setting up survivor self-help groups
within the surrounding communities. The medical services project
has been expanded to provide further services, including surgery,
medication and psychological support. Feasibility studies for
income generating projects (agriculture businesses and artisanal
mining) are also progressing and a radio programme to improve
awareness and understanding of the IGM and community projects
amongst the local community has been set up.
More information on the IGM, the community projects and illegal
incursions into the Williamson mine lease area can be found on
Petra’s website at:
https://www.petradiamonds.com/our-operations/our-mines/williamson/allegations-of-human-rights-abuses-at-the-williamson-mine/.
The Board
As previously announced, Jon
Dudas joined the Board as an independent Non-Executive
Director effective from 1 March 2022,
further strengthening the Board through his broad experience across
the mining and resources sectors, in operations, general
management, information technology, finance and strategy.
Also, as previously announced, Matthew
Glowasky stepped down from the Board as a non-independent,
Non-Executive Director on 17 May. His appointment became effective
in March 2021, following completion
of the Restructuring pursuant to a Nomination Agreement between
Petra and Monarch. While Monarch does not currently intend to
nominate a director to replace Mr Glowasky, it retains its right to
do so.
OPERATIONS REVIEW
Cullinan Mine – strong performance and
extension work under way
Cullinan Mine –
South Africa |
FY
22 |
FY
21 |
Variance |
Sales |
|
|
|
Revenue (US$m) |
322.4 |
250.6 |
+29% |
Diamonds sold
(carats) |
1,899,011 |
2,261,058 |
-16% |
Average price per
carat (US$) |
169 |
111 |
+52% |
|
|
|
|
Total
production |
|
|
|
Tonnes treated
(tonnes) |
4,865,065 |
5,060,339 |
-4% |
Diamonds produced
(carats) |
1,814,975 |
1,943,942 |
-7% |
|
|
|
|
Grade1 |
|
|
|
ROM (cpht) |
36.2 |
38.2 |
-5% |
Tailings (cpht) |
49.6 |
41.0 |
+21% |
|
|
|
|
Segment
result2 (US$m) |
154.4 |
76.8 |
+101% |
|
|
|
|
Costs and
capex |
|
|
|
On-mine cash cost per
total tonne treated (ZAR/t) |
312 |
260 |
+20% |
Total capex
(US$m) |
35.0 |
16.8 |
+108% |
- Petra is not able to precisely measure the ROM / tailings
grade split because ore from both sources is processed
through the same plant; the Company therefore back-calculates the
grade with reference to resource grades
- The segment result includes depreciation of US$52.5 million
At the Cullinan Mine we came in at the upper end of our
production guidance ranges on all criteria except tailings.
Diamonds produced were 7% below last year’s, largely as a result of
the convergence in Tunnel 41 early in the Year, and the planned
depletion of a mining block which had contributed to production in
FY 2021. The convergence has now been effectively mitigated and
factored into our guidance.
The Cullinan Mine’s revenue increased 29% to US$322.4 million due to a 52% increase in the
average price achieved per carat and the US$75.2 million realised for Exceptional Stones.
Together, these more than offset the 16% reduction in diamonds
sold, which was mainly the result of a higher volume of sales in FY
2021 caused by the release of the inventory build-up during the
COVID-19 crisis into the market. Additional revenue of US$1.1 million was generated from Petra’s 50%
share of profit from the sale of polished stones cut from the
18.30ct Type II blue diamond sold as a partnership stone in
August 2021.
The convergence of Tunnel 41 in the C-Cut impacted 18 of a total
of 187 draw points. Remedial action was focused on arresting
convergence by reinforcing the affected pillars and protecting the
tunnel, so that access can be re-established once the area has been
stabilised. We continue to monitor it to determine when we will be
able to re-access this tunnel.
Grade was in line with guidance, notwithstanding the decline
towards the end of the Year due to a change in the composition of
ore within the C-Cut block cave resulting in a higher proportion of
lower-grade and greater-density ore. We are monitoring these
changes together with options to mitigate the grade
differential.
During the Year, the efficiency of the X-Ray Luminescence
technology (XRL), introduced in FY 2021, to reduce the risk of
damage to larger stones in our processing circuit, was tested
through the addition of a modular X-Ray Transmission (XRT) unit.
This unit recovered only 11 additional diamonds of low value,
validating the decision to use XRL technology in the recovery
process.
The on-mine unit cash cost per total tonne treated increased to
ZAR312/t due to inflationary
increases, increased social expenditure and direct costs previously
included under Group G&A costs. FY 2022 capex was US$35.0 million, the majority of which was spent
on the commencement of the newly approved CC1 East mine extension
project. The balance included spend on the projects already
underway in the current mining area, development of a crusher, and
improved long-term accessibility in an area of the C-Cut.
Guidance
FY 2023 to FY 2025 production, cost and capex guidance for the
Cullinan Mine remain unchanged.
- Our production guidance for FY 2023 is between 4.1 and 4.3 Mt
ROM material to be treated, and ROM grade of between 36.5 and
38.5cpht, including the ore from the portions of the current mining
area, the C-Cut, that is lower grade and higher in
density.
- Tailings production is expected to increase to between 0.56 and
0.59 Mt material treated. ROM production will be prioritised,
supplemented by low volumes of recovery tailings. The economic
evaluation of the Cullinan Mine’s substantial tailings resource
will be monitored continuously and could be included in future mine
plans dependent on market conditions and the pricing of smaller
diamonds.
- The on-mine cash cost for FY 2023 guidance is between
ZAR1,413 and ZAR1,486 million in real terms.
- We are guiding FY 2023 capex of between US$72 and US$79
million. In addition to sustaining capex, it primarily
relates to underground development of the new CC1 East production
areas of our extension project, explained above.
- We expect to commence mining from the higher grade CC1 East
section from FY 2024.
Finsch – managing cost and production
profile
Finsch – South
Africa |
FY
22 |
FY
21 |
Variance |
Sales |
|
|
|
Revenue (US$m) |
165.7 |
123.4 |
+34% |
Diamonds sold
(carats) |
1,402,654 |
1,602,312 |
-12% |
Average price per
carat (US$) |
118 |
77 |
+53% |
|
|
|
|
Total
production |
|
|
|
Tonnes treated
(tonnes) |
2,732,982 |
2,311,195 |
+18% |
Grade -
ROM1 (cpht) |
46.7 |
53.5 |
-13% |
Diamonds produced
(carats) |
1,275,323 |
1,237,219 |
+3% |
|
|
|
|
Segment
result1 (US$m) |
34.8 |
(0.5) |
+7060% |
|
|
|
|
Costs and
capex |
|
|
|
On-mine cash cost per
total tonne treated (ZAR/t) |
493 |
536 |
-8% |
Total capex
(US$m) |
12.0 |
4.0 |
+200% |
1 The segment result includes
depreciation of US$24.4 million
While the previously reported waste ingress at Finsch has been
largely mitigated through the implementation of enhanced drill and
blast and draw controls, this requires continuous management.
We saw steady production in the final quarter of the Year
leading to an overall increase of 3%, just below
guidance.
Finsch revenue increased 34% to US$165.7
million due to a 53% increase in the average price per carat
which more than offset a 12% reduction in diamonds sold. As with
the Cullinan Mine, this reduction was mainly the result of a higher
volume of sales in FY 2021 which was caused by the inventory
build-up during the COVID-19 pandemic being released into the
market.
The Business Re-engineering (BRE) project recommendations being
implemented at Finsch are designed to match its cost base to the
revised production levels, taking into account waste ingress
issues.
Finsch has already reduced on-mine cash unit costs by 8% to
ZAR493/t due to the cost curtailment
measures undertaken as part of the BRE project and increased
production volumes.
FY 2022 capex was US$12.0 million
which was mainly spent on underground projects. The expansion to
the new 78 Level Phase 2 project has commenced, with ramp-up to
full production in progress. In addition, capital has been spent on
early mobilisation to de-risk the new Lower Block 5 3-Level
sub-level cave project.
Guidance
FY 2023 to FY 2025 production, cost and capex guidance for
Finsch remain unchanged , although
lower grades experienced at Finsch in Q4 FY 2022 have continued
into Q1 of this year, with ongoing monitoring and mitigation plans
to address this waste dilution. We will continue to implement
the BRE project recommendations to align costs with production.
- FY 2023 production is planned at between 2.9 and 3.0 Mt ROM
including tonnage from the new section and with waste ingress being
continually monitored. Tailings production is expected to be c.0.6
Mt of treated material.
- Finsch’s underground ROM grade is expected to remain within
guidance of between 43.6 and 46.0 cpht. While tailings production
after FY 2023 does not form part of the current mine plan, lower
grade tailings material remains available to supplement Finsch’s
underground operations in the future. The total on-mine cash cost
for FY 2023 is guided at between ZAR1,293 and ZAR1,359
million in real terms. We are continuing to implement the
BRE project outcomes to enhance margins at Finsch.
- FY 2023 capex is guided at between US$65 and US$71
million, primarily relating to the new Lower Block 5 3-Level
sub-level cave project which was approved during the
Year.
- We expect underground development to commence during FY 2023
with production from the new Sub-Level Cave in FY 2025.
Williamson - resumed production in Q1
FY 2022
Williamson –
Tanzania |
FY
22 |
FY
211 |
|
Sales |
|
|
|
Revenue (US$m) |
75.9 |
4.6 |
|
Diamonds sold
(US$m) |
197,756 |
30,339 |
|
Average price per
carat (US$) |
384 |
150 |
|
|
|
|
|
Total
production |
|
|
|
Tonnes treated
(tonnes) |
3,591,099 |
0 |
|
Grade (cpht) |
6.4 |
0 |
|
Diamonds produced
(carats) |
228,070 |
0 |
|
|
|
|
|
Segment
result2 (US$m) |
22.2 |
(14.3) |
|
|
|
|
|
Costs and
capex |
|
|
|
On-mine cash cost per
total tonne treated (US$/t) |
13.9 |
0 |
|
Total capex
(US$m) |
3.3 |
0.3 |
|
Note 1: Williamson was on care and
maintenance during FY 2021
2 The segment result includes
depreciation of US$5.0 million
Operations at Williamson recommenced in August 2021, having been on care and maintenance
from April 2020. FY 2022 was a year
of improving the performance of the mine after this 17-month period
of shutdown and the operations are now fully ramped up.
Williamson’s production and grade were in line with guidance.
Revenue was US$75.9 million, compared
with US$4.6 million in FY 2021 when
the only diamond sales were the final parcel recovered prior to the
mine being placed on care and maintenance. We benefitted from the
recovery of an exceptional 32.32 carat pink diamond which was sold
for US$13.8 million in the
December 2021 tender.
The on-mine cash unit cost of US$13.9/t was in line with guidance. FY 2022
capex was US$3.3 million, which
included the costs of preparing the mine for reopening and
sustaining the operations.
Guidance
The focus will be the continued stabilisation of operations
following the period of care and maintenance, including increasing
throughput and diamond recovery, while ensuring waste-stripping is
undertaken at the required rate.
FY 2023 to FY 2025 production, cost and capex guidance remain
unchanged for Williamson.
- We are guiding between 5.2 and 5.5 Mt of ROM material to be
treated during FY 2023 which reflects the fully ramped up
production.
- The total on-mine cash cost for FY 2023 is guided at between
US$66 and US$69 million in real terms.
- Capex guidance for FY 2023 is approximately US$9 million and relates to sustaining capital
largely associated with waste stripping and fines-residue
infrastructure.
Koffiefontein - approaching the end of
its mine plan
Koffiefontein –
South Africa |
FY
22 |
FY
21 |
Variance |
Sales |
|
|
|
Revenue (US$m) |
21.5 |
27.9 |
-23% |
Diamonds sold
(carats) |
36,950 |
66,650 |
-45% |
Average price per
carat (US$) |
581 |
419 |
+39% |
|
|
|
|
Total
production |
|
|
|
Tonnes treated
(tonnes) |
466,957 |
754,369 |
-38% |
Diamonds produced
(carats) |
35,302 |
59,151 |
-40% |
Grade
(cpht)1 |
7.6 |
7.8 |
-3% |
|
|
|
|
Segment
result1 (US$m) |
(13.8) |
(8.1) |
-70% |
|
|
|
|
Costs and
capex |
|
|
|
On-mine cash cost per
total tonne treated (ZAR/t) |
1,106 |
651 |
+70% |
Total capex
(US$m) |
0.6 |
1.7 |
-65% |
1 Segment result includes
depreciation US$0.3 million,
Williamson US$5.0 million
Koffiefontein’s production metrics, except grade, were below
guidance. Revenue decreased 23% to US$21.5
million as the 39% increase in the average price per carat
was more than offset by the 45% decline in the number of diamonds
sold.
As Koffiefontein approaches the end of its mine plan in 2025,
Petra is exploring options for a responsible exit. We are
evaluating non-binding expressions of interest, received post
year-end for the mine. If a sales transaction does not eventuate,
Petra will evaluate its options and continue to operate the mine
responsibly.
The BRE project at Koffiefontein, which is independent of the
disposal process, aims to provide for sustainable operations until
the mine’s closure and has resulted in a labour reduction process
to align the operation with the reduced tonnage profile. This
process was concluded and the mine started on a new shift
configuration with the reduced labour structure on 30 June 2022.
The on-mine cash unit cost increased to ZAR1,106/t, mainly due to decreased tonnages and
inflationary increases. FY 2022 capex was US$0.6 million and this was spent mainly on the
completion of a workshop underground.
Guidance
FY 2023 to FY 2025 production, cost and capex guidance is
maintained and takes into account the lower production and cost
profile we have put in place.
- The total on-mine cash cost for FY 2023 is guided at between
ZAR415 and ZAR437 million in real terms.
- FY 2023 capex guidance is between c.US$1 and US$2
million, primarily relating to sustaining costs.
FINANCIAL RESULTS
SUMMARY RESULTS (unaudited)
|
Year
ended 30 June 2022
(“FY 2022”) |
Restated
Year ended 30 June 2021
(“FY 2021”) 15 |
US$
million |
US$
million |
Revenue |
585.2 |
406.9 |
Adjusted mining and
processing costs1 |
(307.1) |
(276.1) |
Other direct
income |
(0.8) |
6.8 |
Profit from mining
activity2 |
277.3 |
137.6 |
Other corporate
income |
0.6 |
— |
Adjusted corporate
overhead |
(13.0) |
(7.4) |
Adjusted
EBITDA3 |
264.9 |
130.2 |
Depreciation and
Amortisation |
(85.3) |
(80.8) |
Share-based
expense |
(1.1) |
(0.5) |
Net finance
expense |
(36.6) |
(67.2) |
Adjusted
profit/(loss) before tax |
141.9 |
(18.3) |
Tax expense (excluding
taxation credit / charge on impairment charge and unrealised
foreign exchange gain / (loss))12 |
(39.9) |
(7.2) |
Adjusted net
profit/(loss) after tax4 |
102.0 |
(25.5) |
Impairment reversal /
(charge) – operations and other receivables5 |
19.6 |
(38.4) |
Impairment of BEE
loans receivable – expected credit loss release 6 |
— |
5.8 |
Gain on extinguishment
of Notes net of unamortised costs |
— |
213.3 |
Profit on disposal of
subsidiary7 |
— |
14.7 |
Recovery / (costs) and
fees relating to investigation and settlement of human rights abuse
claims |
0.8 |
(12.7) |
Provision for
unsettled and disputed tax claims |
— |
(19.5) |
Net unrealised foreign
exchange (loss) / gain |
(36.5) |
74.6 |
Taxation credit /
(charge) on unrealised foreign exchange (loss) /
gain12 |
2.2 |
(19.9) |
Taxation credit on
impairment charge |
— |
4.2 |
Net profit after
tax |
88.1 |
196.6 |
Earnings per share attributable to equity holders of the Company
–
USc |
|
|
Basic profit per
share |
35.53 |
260.70 |
Adjusted profit /
(loss) per share8 |
42.93 |
(36.20) |
|
Unit |
As
at
30 June 2022
(US$ million) |
As at
30 June 2021
(US$ million) |
Cash at bank –
(including restricted amounts) |
US$m |
288.2 |
173.0 |
Diamond debtors |
US$m |
37.4 |
38.3 |
Diamond
inventories13 |
US$m
/Cts |
52.7
453,380 |
56.5
637,676 |
US$336.7m loan notes
(issued March 2021)9 |
US$m |
366.2 |
327.3 |
Bank loans and
borrowings10 |
US$m |
— |
103.0 |
Consolidated Net
debt11 |
US$m |
40.6 |
228.2 |
Bank facilities
undrawn and available10 |
US$m |
61.5 |
7.7 |
Consolidated net debt
: Adjusted EBITDA |
|
0.15x |
1.75x |
The following
exchange rates have been used for this announcement: average for FY
2022 US$1:ZAR15.22 (FY 2021: US$1:ZAR15.41);
closing rate as at 30 June 2022
US$1:ZAR16.27 (30 June
2021: US$1:ZAR14.27).
Notes:
The Group uses several non-GAAP measures above and throughout
this report to focus on actual trading activity by removing certain
non-cash or non-recurring items. These measures include adjusted
mining and processing costs, profit from mining activities,
adjusted EBITDA, adjusted net profit after tax, adjusted earnings
per share, adjusted US$ loan note, net debt and consolidated net
debt for covenant measurement purposes. As these are
non-GAAP measures, they should not be considered as replacements
for IFRS measures. The Group’s definition of these non-GAAP
measures may not be comparable to other similarly titled measures
reported by other companies. The Board believes that such
alternative measures are useful as they exclude one-off items such
as the impairment charges and non-cash items to provide a clearer
understanding of the underlying trading performance of the
Group.
- Adjusted mining and processing costs are mining and
processing costs stated before depreciation.
- Profit from mining activities is revenue less adjusted
mining and processing costs plus other direct income.
- Adjusted EBITDA is stated before depreciation, amortisation
of right-of-use asset, share-based expense, net finance expense,
tax expense, impairment reversal/charges,
expected credit loss release/ (charge), gain on extinguishment of
Notes net of unamortised costs, profit on disposal of subsidiary,
costs and fees relating to investigation and settlement of human
rights abuse claims, provision for unsettled and disputed tax
claims and net unrealised foreign exchange gains and
losses.
- Adjusted net profit/(loss) after tax is net profit/(loss)
after tax stated before impairment reversal/charge, expected credit
release (loss) provision, gain on extinguishment of Notes
net of unamortised costs, costs and fees relating to
investigation and settlement of human rights abuse claims,
profit on disposal net unrealised foreign exchange gains
and losses, and excluding taxation (charge) credit on net
unrealised foreign exchange gains and losses and excluding taxation
credit on impairment charge.
- Impairment reversal of US$19.6
million (30 June 2021:
US$38.4 million charge) was due to
the Group’s impairment review of its operations and other
receivables. Refer to note 15 below for further details.
- Reversal of impairment of BEE loans receivable of US$nil
(30 June 2021: US$5.8 million) is due to the Group’s expected
credit loss assessment of its BEE loans receivable. Refer to note
11 below for further details.
- The profit on disposal of subsidiary of US$14.7 million in FY2021 includes the
reclassification of foreign currency translation reserve, net of
tax of Sekaka Diamonds (Pty) Ltd.
- Adjusted EPS is stated before impairment charge, expected
credit release (loss) provision, gain on extinguishment of
Notes net of unamortised costs, profit on disposal of
subsidiary, acceleration of unamortised costs on
restructured loans and borrowings, costs and fees relating to
investigation and settlement of human rights abuse claims,
provision for unsettled and disputed tax claims, net unrealised
foreign exchange gains and losses, and excluding taxation (charge)
credit on net unrealised foreign exchange gains and losses and
excluding taxation credit/charge on impairment
reversal/charge.
The comparative basic profit per
share and adjusted profit per share have been adjusted to give
effect to the share consolidation of one new share for every 50
existing shares completed on 29 November
2021 with the Company’s resultant issued share capital now
consisting of 194,201,785 ordinary shares of 0.05 pence each.
- The US$336.7 million loan
notes have a carrying value of US$366.2
million (FY2021: US$327.3
million) which represents the gross capital of US$336.7 million of notes, plus accrued interest
and net of unamortised transaction costs capitalised, issued
following the capital restructuring (the “Restructuring”) completed
during March 2021. Refer to
detailed Debt Restructuring Note 18.
- Bank loans and borrowings represent amounts drawn under the
Group’s refinanced South African banking facility with ABSA,
completed in June 2022. As at 30 June
2022 the new facility with ABSA comprises a ZAR1 billion (US$61.5
million) revolving credit facility which remains undrawn and
available.
During the Year, the South African
banking facilities held with the Group’s previous consortium of
South African lenders were settled and cancelled, comprising of the
revolving credit facility of ZAR404.6
million (US$24.9 million)
(capital plus interest) and the term loan of ZAR893.2 million (US$54.9
million) (capital plus interest).
- Consolidated Net Debt is bank loans and borrowings plus loan
notes, less cash, less diamond debtors plus BEE partner bank
facilities. In FY2021 Williamson was classified as held for sale,
if Williamson was consolidated as at 30 June
2021 consolidated net debt would have reduced by cash and
cash equivalents held by Williamson of US$9.2 million to US$219.0
million.
- Tax (expense) / credit is the tax (expense) / credit for the
Period excluding taxation credit / (charge) on impairment charge
and unrealised foreign exchange gain / (loss) generated during the
Period, such exclusion more accurately reflects resultant Adjusted
net profit / (loss).
- Williamson’s diamond inventory includes the 71,654.45
carat parcel of diamonds blocked for export during August 2017, with a carrying value of
US$12.5 million. In terms of the
framework agreement reached with the Government of Tanzania, as announced on 13 December 2021, the proceeds from the sale of
this parcel will be allocated to Williamson.
- Operational free cashflow is defined as cash generated from
operations less acquisition of property, plant and
equipment.
- The results for FY2021 has been restated with the operating
results of Williamson which were previously classified under loss
on discontinued operations, for further detail refer to note
17.
Revenue
Total revenue for FY 2022 amounted to US$585.2 million (FY 2021: US$406.9 million), comprising revenue from rough
diamond sales of US$584.1 million (FY
2021: US$406.9 million) and
additional revenue from profit share agreements of US$1.1 million (FY 2021: nil).
FY 2022 revenue from rough diamond sales increased 44% to
US$584.1 million (FY 2021:
US$406.9 million) driven by sales
from a higher than average number of Exceptional Stones
contributing US$89.1 million during
the Year (FY 2021: US$62.0 million);
supported by the strong diamond market, and a 41.5% increase in
like-for-like diamond prices.
Mining and processing costs
The mining and processing costs for FY 2022 comprised on-mine
cash costs as well as other operational expenses. A breakdown of
the total mining and processing costs for the Year is set out
below.
|
On-mine
cash costs1
US$m |
Diamond
royalties
US$m |
Diamond
inventory and stockpile movement
US$m |
Group
technical, support and marketing costs2
US$m |
Adjusted
mining and processing costs
US$m |
Depreciation3
US$m |
Total
mining and processing costs (IFRS)
US$m |
FY
2022 |
272.3 |
14.6 |
0.5 |
19.7 |
307.1 |
84.4 |
391.5 |
FY
20214 |
208.9 |
3.2 |
42.2 |
21.8 |
276.1 |
80.0 |
356.1 |
Notes:
- Includes all direct cash operating expenditure at
operational level, i.e. labour, contractors, consumables, utilities
and on-mine overheads.
- Certain technical, support and marketing activities are
conducted on a centralised basis.
- Includes amortisation of right-of-use assets under IFRS 16
of US$2.3 million (FY 2021:
US$0.6 million) and excludes
exploration and corporate / administration.
- For comparative purposes, the FY 2021 figures include
Williamson as it is no longer held for sale at 30 June 2022.
Absolute on-mine cash costs in FY 2022 increased by c.30%
compared to FY 2021 and in line with expectations, due to:
- The effect of translating ZAR denominated costs at the South
African operations at a stronger ZAR/USD average exchange rate
(1.4% increase)
- Williamson mine resuming production in FY 2022 after being on
care and maintenance throughout FY 2021 and changes in volumes at
South-African operations (18.3% increase);
- Other cost movements, due to increased social expenditure and
costs previously included under Group technical, support and
marketing costs (1.2% increase)
- Inflationary increases (c.6.8% increase), the impact of
electricity costs (0.9% increase) and annual labour increases and
voluntary separation pay-outs (1.4% increase)
Royalties increased to US$14.6
million (FY 2021: US$3.2
million) due to increased profits net of capex across the SA
operations resulting in higher royalty percentages, as defined in
the royalty legislation of South
Africa and Williamson recommencing operations during the
Year.
Profit from mining activities
Profit from mining activities increased 102% to US$277.3 million (FY 2021: US$137.6 million), mainly due to improved diamond
pricing and the contributions from Exceptional Stones.
Adjusted corporate overhead – general
and administration
Corporate overhead (before depreciation and share based
payments) increased to US$13.0
million for the Year (FY 2021: US$7.4
million) mainly attributable to the increase in corporate
governance structures, strategic developments and Board
appointments introduced during the Year.
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less
adjusted corporate overhead, increased 103% to US$264.9 million (FY 2021: US$130.2 million), representing an adjusted
EBITDA margin of 45% (FY 2021: 32%) driven by the stronger diamond
market and resultant improved diamond pricing coupled with the
contribution from Exceptional Stones.
Depreciation and amortisation
Depreciation and amortisation for the Period increased to
US$85.3 million (FY 2021:
US$80.8 million), mainly due to
production recommencing at Williamson.
Impairment reversal / charge
As a result of the impairment reviews carried out at the
Cullinan, Finsch, Koffiefontein and Williamson Mines, and the Group’s other
receivables during the Year, the Board recognised an overall net
impairment reversal of US$19.6
million (FY 2021: US$38.4
million impairment charge), comprising:
US$ million |
FY 2022 |
FY 2021 |
Asset class |
|
|
Reversal of impairment - property,
plant & equipment (Refer note 15) |
21.4 |
— |
Impairment - property, plant &
equipment (Refer note 15) |
(0.3) |
(38.7) |
Impairment (charge)/reversal - other
current receivables (refer note 15) |
(1.5) |
0.3 |
|
19.6 |
(38.4) |
Impairment reviews carried out at the Cullinan, Finsch, and
Williamson Mines’ operational assets did not result in an
impairment charge or reversal during the Year (FY 2021:
US$38.7 million). Asset level
impairments at Koffiefontein amount to US$0.3 million (FY 2021: US$38.7 million in respect of Finsch,
Koffiefontein and Williamson), of the Group’s carrying value of
property, plant and equipment of US$608.2
million (FY 2021: US$764.5
million) pre-impairment. There was an impairment reversal of
US$21.4 million relating to an IFRS 5
impairment adjustment for Williamson as the results for Williamson
have been re-consolidated.
Impairment of BEE loans receivable – expected credit
loss provision
The Group has applied the expected credit loss impairment model
to its BEE loans receivable. In determining the extent to which
expected credit losses may apply, the Group assessed the future
free cashflows to be generated by the mining operations based on
the current mine plans. This assessment indicated a net credit loss
reversal / charge of US$nil (FY 2021: US$5.8
million expected credit loss reversal); refer to note 2 for
further detail.
Net financial (expense)/income
Net financial expense of US$73.1
million (FY 2021: US$220.7
million income) comprises:
US$ million |
FY 2022 |
FY 2021 |
Net realised foreign exchange gain /
(loss) on settlement of forward exchange contracts |
12.6 |
(6.1) |
Interest received on bank
deposits |
1.3 |
0.7 |
Net interest receivable / (payable)
on the BEE partner loans and amortisation of lease liabilities in
accordance with IFRS 16 |
1.8 |
(3.0) |
Net gain on extinguishment of
Notes |
— |
213.3 |
Offset by: |
|
|
Interest on the Group’s debt and
working capital facilities |
(45.3) |
(51.5) |
Unwinding of the present value
adjustment for Group rehabilitation costs |
(5.4) |
(4.6) |
Acceleration of unamortised bank
facility and Notes costs |
(1.6) |
(2.7) |
Net unrealised foreign exchange
(losses) / gains |
(36.5) |
74.6 |
Net financial (expense) /
income |
(73.1) |
220.7 |
Tax credit / charge
The tax charge of US$37.8 million
(FY 2021: US$23.0 million) comprising
deferred tax charge of US$30.4
million (FY 2021: US$22.7
million) and a net current tax charge of US$7.4 million (FY 2021: US$0.3 million).
The Consolidated Income Statement deferred tax charge for the
Year reflects movements in deferred tax of US$35.5 million (30 June
2021: US$3.4 million) in
respect of property, plant and equipment and associated capital
allowances, US$2.5 million deferred
tax credit (30 June 2021:
US$2.8 million) relating to
provisions and a US$2.6 million
deferred tax credit (30 June 2021:
US$nil) due to the change in the South African corporate tax rate
from 28% to 27% reducing the deferred tax liabilities recognised at
the Finsch and Cullinan Mines at
Year end.
The net current tax charge of US$7.4
million (30 June 2021:
US$0.3 million includes a current tax
charge of US$7.6 million at Finsch
for the Year (FY 2021: US$nil million).
Profit on disposal of subsidiary
including associated impairment, net of tax
In FY 2021, the profit on disposal of subsidiary including
associated impairment, net of tax of US$14.7
million relates to the Group’s disposal of its interests in
Sekaka, its exploration operations in Botswana, and is made up of a US$0.3 million disposal consideration, net profit
of US$1.3 million for the Period
1 July 2020 to the 30 November 2020 disposal date and the recycling
of the foreign currency translation reserve of US$13.3 million, offset by a net asset disposal
amount of US$0.2 million. Refer to
Note 16 for further detail.
Williamson
At the end of FY 2021, the Board had decided to review its
strategic options at Williamson and the asset was classified as an
asset held for sale.
In terms of the IFRS requirements to measure the assets of a
disposal group at the lower of carrying amount and fair value less
costs to sell, the determination of the fair value is complex and
subject to considerable judgement. Based on management’s best
estimate of the fair value at 30 June
2021, the following amounts were recognised as a result of
that reclassification:
- An impairment charge of US$21.4
million in respect of property, plant and equipment
- A US$11.2 million charge
attributable to Williamson’s net loss for FY 2021
- A US$19.5 million provision for
unsettled and disputed tax claims arising from the ordinary course
of business
During H1 FY 2022, the Group entered into a Framework Agreement
with the Government of Tanzania
regarding the Williamson mine which will reduce Petra’s indirect
shareholding from 75% to 63%. Petra also entered into a
non-binding Memorandum of Understanding (“MoU”) to sell 50% less
one share of the entity that holds Petra’s shareholding in
Williamson (“WDL”) to Caspian Limited. Upon completion of the
transactions contemplated by the MoU and the capital restructuring
in the Framework Agreement becoming effective (expected in H1 FY
2023), Petra and Caspian will each
indirectly hold a 31.5% stake in WDL, but with Petra retaining a
controlling interest in WDL, and the Government of Tanzania holding the remaining 37%. These
agreements are in line with Petra’s objective of reducing its
exposure in Tanzania while
retaining control, through its controlling interest in the entity
that holds Petra’s shares in WDL. The Williamson mine is therefore
no longer classified as an asset held for sale in FY 2022 and was
reconsolidated into the Group results for FY 2022. As a result the
Group also reversed a Group level impairment charge relating to
Williamson, previously recognised under IFRS 5, of US$21.4 million. Refer to Note 17 for additional
detail.
Earnings per share
Basic profit per share from continuing operations of USc35.53
was recorded (FY 2021: USc260.70, including gain on extinguishment
of Notes).
Adjusted profit per share from continuing operations (adjusted
for impairment charges, taxation credit on net unrealised foreign
exchange losses and net unrealised foreign exchange gains and
losses) of USc42.93 was recorded (FY 2021: USc36.20 loss
(adjusted for impairment charges, taxation charge on net unrealised
foreign exchange gains and net unrealised foreign exchange gains
and losses)).
The comparative basic profit per share and adjusted profit per
share have been adjusted to give effect to the share consolidation
of one new share for every 50 existing shares completed on
29 November 2021, with the Company’s
resultant issued share capital now consisting of 194,201,785
ordinary shares of 0.05 pence
each.
Operational free cash flow
During the Year, operational free cash flow of US$230.0 million (FY 2021: US$120.1 million before restructuring fees of
US$15.5 million) reflects the impact
from the sale of a high number of Exceptional Stones and stronger
diamond prices. This strong cash flow performance was positively
impacted by:
- US$7.6 million inflow (FY 2021:
US$12.1 million outflow) cash finance
expenses net of finance income and net realised foreign exchange
gains/(losses).
This was offset by:
- Restructuring fees settled during the Year of US$nil (FY 2021
US$29.9 million)
- Income tax paid of US$7.8 million
(FY 2021: US$0.3 million inflow)
- US$3.5 million dividend paid to
BEE partners (FY 2021: US$7.0 million
advances to BEE partners, largely related to servicing of BEE bank
debt, with the advances recoverable against future BEE partner
distributions)
Cash and Diamond Debtors
As at 30 June 2022, Petra had cash
at bank of US$288.2 million (FY 2021:
US$163.9 million). Of these cash
balances, US$271.9 million was held
as unrestricted cash (FY 2021: US$147.8
million), US$15.5 million was
held by Petra’s reinsurers as security deposits on the Group’s cell
captive insurance structure (with regards to the Group’s
environmental guarantees) (FY 2021: US$15.3
million) and US$0.8 million
was held by Petra’s bankers as security for other environmental
rehabilitation bonds lodged with the Department of Mineral
Resources and Energy in South
Africa (FY 2021: US$0.8
million).
Diamond debtors at 30 June 2022
were US$37.4 million (FY 2021:
US$38.3 million).
Loans and Borrowings
The Group had loans and borrowings (measured under IFRS) at Year
end of US$366.2 million (FY 2021:
US$430.3 million) comprised of
US$366.2 million Notes (includes
US$50.3 million accrued interest and
unamortised transaction costs of US$15.2
million), bank loans and borrowings of US$nil (FY
2021: US$103.0 million). Bank debt
facilities undrawn and available to the Group at 30 June 2022 were US$61.5
million (FY 2021: US$7.7
million).
Consolidated net debt at 30 June
2022 was US$40.6 million
(FY2021: US$228.2 million).
Covenant Measurements attached to
banking facilities
The Company’s revised EBITDA-related covenants associated with
its restructured banking facilities are as outlined below:
- To maintain a net debt : EBITDA ratio tested semi-annually on a
rolling 12-month basis
- To maintain an Interest Cover Ratio (ICR) tested semi-annually
on a rolling 12-month basis
- To maintain minimum 12 month forward looking liquidity
requirement that consolidated cash and cash equivalents (excluding
diamond debtors) shall not fall below US$20.0 million
The Company’s new covenant levels for the respective measurement
periods are outlined below:
|
FY22
H2 |
FY23
H1 |
FY23
H2 |
FY24
H1 |
FY24
H2 |
FY25
H1 |
FY25
H2 |
FY26
H1 |
Consolidated net debt
: EBITDA Leverage ratio (maximum) |
4.00 |
4.00 |
3.50 |
3.50 |
3.25 |
3.25 |
3.00 |
3.00 |
Interest Cover Ratio (minimum) |
1.85 |
1.85 |
2.50 |
2.50 |
2.75 |
2.75 |
3.00 |
3.00 |
For further detail on the restructuring of the SA Lender
facilities refer to Note 8 below.
Going concern considerations
The Board has reviewed the Group’s forecasts with various
sensitivities applied, for the 18 months to December 2023, including both forecast liquidity
and covenant measurements. As per the First Lien agreements, the
liquidity and covenant measurements exclude contributions from
Williamson’s trading results and only recognises cash distributions
payable to Petra upon forecasted receipt, or Petra’s funding
obligations towards Williamson upon payment. The review took into
account the Groups intention to purchase up to US$150 million of the Senior Secured Second Lien
Notes due in 2026 through a tender offer to bondholders.
The Board has given careful consideration to potential risks
identified in meeting the forecasts under the review period. The
following sensitivities have been performed in assessing the
Group’s ability to operate as a going concern (in addition to the
Base Case) at the date of this report:
- A 10% decrease in forecast rough diamond prices from
July 2022 to December 2023
- A 10% strengthening in the forecast South African Rand (ZAR)
exchange rate against the US Dollar from July 2022 to December
2023
- A 10% increase in operating costs from July 2022 to December
2023
- A US$15 million reduction in
revenue contribution from Exceptional Stones
- A production disruption sensitivity assuming no carat
production across the Group for two weeks in February 2023 (could be due to extreme weather
conditions or supply chain disruptions or any other unexpected
event)
- Combined sensitivity: Prices down 10% and ZAR stronger by 10%,
reduced contribution from Exceptional Stones and operating costs up
5%
Under all the cases, the forecasts indicate that the Group’s
liquidity outlook over the 18-month period to December 2023 remains strong, even when applying
the above sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the
new First Lien (1L) facility do not indicate any breaches during
the 18-month review period for the base case as well as all the
above sensitivities, except for the combined sensitivity, which
shows a covenant breach for the required ICR in the December 2023 measurement period. While the ICR
is projected to be breached in this combined sensitivity, neither
the Net Debt : EBITDA covenant nor the liquidity covenant is
projected to be breached, while the revolving credit facility (RCF)
remains undrawn. It is therefore assumed that the RCF remains
available on the expectation that the 1L lender will agree to an
ICR covenant waiver given that the Group does not expect to utilise
the RCF for servicing of its Second Lien (2L) interest obligations.
Furthermore, this potential ICR breach may be cured by means of
reducing of our gross debt by utilising existing available cash
reserves and/or marginally increasing our projected EBITDA for the
preceding 12-month period.
As a result, the Board concluded that there are no material
uncertainties that would cast doubt on the Company continuing as a
going concern. See ‘Basis of preparation including going
concern’ in the Financial Statements for further information.
Capex
Total Group capex for the Year increased to US$52.2 million (FY 2021: US$23.8 million), comprising:
- US$34.5 million expansion capex
(FY 2021: US$16.9 million)
- US$17.7 million sustaining capex
(FY 2021: US$6.9 million).
Capex
(US$m) |
FY
2022 |
FY
2021 |
Cullinan |
35.0 |
16.8 |
Finsch |
12.0 |
4.0 |
Williamson |
3.3 |
0.3 |
Koffiefontein |
0.6 |
1.7 |
|
|
|
Subtotal – capex
incurred by operations |
50.9 |
22.8 |
Corporate |
1.3 |
1.0 |
Total Group
capex |
52.2 |
23.8 |
Dividend
No dividend was declared for FY 2022 (FY2021: US$nil).
PRINCIPAL BUSINESS RISKS
The Group is exposed to a number of risks and uncertainties
which could have a material impact on its long-term development,
and performance and management of these risks is an integral part
of the management of the Group.
A summary of the risks identified as the Group’s principal
external, operating and strategic risks (in no order of priority),
which may impact the Group over the next twelve months, is listed
below.
Risk |
Risk appetite |
Risk rating |
Nature of risk |
Change in FY 2022 |
External Risks |
|
|
|
|
1. Rough diamond
price |
High |
Medium |
Long term |
Lower – like for
like diamond prices increased 41.5% (FY 2021: 9%) during FY 2022
which was largely attributable to mid-stream inventory restocking
and continued strong jewellery retail sales. Lower global diamond
production also resulted in a more positive outlook for the diamond
market whilst macroeconomic uncertainties caused by rising interest
rates and inflation are potential dampeners of demand. |
2. Currency |
High |
Medium |
Long term |
No change –
whilst initially stable, the ZAR/USD exchange rate experienced
significant volatility during FY 2022, closing the Year at 16.27
ZAR/USD, compared to 14.27 ZAR/USD on 30 June 2021. The impact of
the war in Ukraine benefitted the Rand, though over the longer term
the Rand is expected to weaken as South Africa’s inflation rate
remains high. |
3. Country
and political |
High |
Medium |
Long term |
Lower – while the
risk of political instability remains in South Africa, the outcomes
of the ruling party’s policy conference were positive and markets
were encouraged by party support for the President’s proposals.
After the South African High Court judgement in favour of the
Minerals Council SA, the DMRE has indicated it will seek
legislative amendments of the Mineral and Petroleum Resources
Development Act which could reverse aspects of the judgement, in
particular the legal status of the Mining Charter. In Tanzania, the
risk of political instability remains lower under the new President
and following entry by Petra into a Framework Agreement with the
Government that is yet to become effective |
4. COVID-19 pandemic (operational
impact) |
Medium |
Medium |
Short to medium term |
Lower COVID-19
restrictions in South Africa and Tanzania have been gradually
lifted during the Year due to the decreasing numbers of individuals
contracting the virus which led, in South Africa, to the
termination of the national state of emergency. The emphasis has
shifted to continuing the promotion of the administration of
vaccinations, including booster shots, as this remains the best
protection against COVID-19. |
|
|
|
|
|
|
Strategic Risks |
|
|
|
|
5. Group Liquidity |
Medium |
Medium |
Short to medium term |
Lower – a
combination of higher diamond prices, robust production levels in
line with guidance and record proceeds from the sale of Exceptional
Stones contributed to increased revenue, strong free cash flow and
a reduction in net debt to US$40.6 million as at 30 June 2022,
thereby significantly strengthening the balance sheet. The Company
also completed the refinancing of its first lien debt facility
which will deliver some US$5 million in savings over the next two
years as a result of reduced utilisation and more favorable terms
than the previous facility. |
6. Licence to operate: regulatory
and social impact & community relations |
Medium |
Medium |
Long term |
No
change – Petra continued to comply in all material respects
with relevant laws and regulations in the countries in which it
operates. In FY 2022, local operations conducted 451 (FY 21:
658) social engagements which included internal (employees and
committees) and external (Government, communities, forums and
SMMEs) engagements. Stakeholder engagement plans (SEPs)
continue to be reviewed and updated to increase value-add
engagements at Government and community levels.
Following the Company’s May 2021 announcement on the alleged human
rights breaches in Tanzania, Petra has continued to progress the
design and implementation of the IGM for Williamson. This has
involved extensive stakeholder engagements with all levels of
Government and the local community to create awareness of the IGM
process and to obtain initial feedback on how the IGM is envisaged
to operate. The current target is for the IGM to become
operational during Q2 CY 2023.
The Company has also progressed a number of projects to provide
sustainable benefits to the communities located close to the
Williamson mine which include (1) a medical support project, (2) an
artisanal and small-scale mining project, (3) an agribusiness
development initiative, (4) improved delineation of the Williamson
mine boundaries, including access to the mine lease area for the
collection of firewood and (5) an awareness initiative in respect
of sexual and gender-based violence. |
Operating Risks |
|
|
|
|
7. Mining and production |
Medium |
Medium |
Long term |
Lower – positive throughput
improvements supported by Project 2022 (which completed in June
2022) continued to yield good results. Group production for FY 2022
increased by 3% in line with guidance, largely owing to the
resumption of mining at Williamson. Production at the Cullinan Mine
during Q4 FY 2022 was lower due to the depletion of the current
CC1E mining area and a difference in the make-up of kimberlite in
the C-Cut. When compared with FY2021, production at the Finsch Mine
stabilised in the second half of FY 2022, although ROM grade was
13% lower as a result of waste dilution despite the implementation
of controls which were continuously monitored. Group production
guidance for FY2023 to FY 2025 remains unchanged at this
stage. |
|
8. ROM grade and product mix
volatility |
Medium |
Medium |
Short term |
No change – the current
mining blocks at the South African operations are reaching maturity
and while the current orebody footprints are still large enough to
deliver relative consistency and product mix, increasing levels of
variability in terms of ROM Grade and product mix can be expected
going forwards which will be mitigated by the ramp up of the new
mining blocks at CDM and FDM. |
|
9. Labour relations |
Medium |
Medium |
Short to medium term |
No change – stable labour
relations were experienced during FY 2022. The Company reached
agreement with NUM on a new three-year wage agreement for employees
in the Paterson A and B Bands at the South African operations. The
Company also concluded a three-year wage agreement for employees on
the Paterson C-Lower Band with both NUM and UASA at the SA
operations. Review of the collective bargaining agreement at WDL is
ongoing with the majority union (TAMICO). |
|
|
|
|
|
|
10. Safety |
Medium |
Medium |
Short to medium term |
Lower – Petra’s
safety performance saw a 40% reduction in Lost Time Injuries (LTIs)
to 15 for the Year and a corresponding 48% improvement in the Lost
Time Injury Frequency Rate for the Year. The only metric on
which Petra’s performance deteriorated was in respect of Non-Lost
Time Injuries, which saw an increase of 11% but this was against a
backdrop of (i) an increased number of LTIs incurred in FY 2021
versus the low number of incurred NLTIs in FY 2021 and (ii) an
increased number of shifts worked in FY 2022 which meant Petra’s
Non-Lost Time Injury Frequency Rate improved by 7%. The
Cullinan Mine in particular, had an exceptional year, celebrating a
LTI-free year on 25 April 2022. |
11. Environment |
Medium |
Medium |
Long term |
No change –
implementation of waste management procedures and the setting of
annual objectives to improve waste management has resulted in
higher waste recycling (25% more waste was recycled in FY 2022 than
in the previous year) and lowered the risk caused by
landfilling. On land rehabilitation, Petra has positively
transformed 120 hectares of previously disturbed land during FY
2022. The implementation of annual objectives for improved
water efficiency has seen Petra reach internal water recycling
figures averaging 80% over the last four years. |
12. Climate Change |
High |
Medium |
Long term |
No change – the
Group’s Climate Change Adaption Policy and strategy is currently in
year 3 of the 5 year implementation plan. Petra uses the World Bank
Climate Change Knowledge Portal (“CCKP”) to estimate physical
climate change impacts on, and opportunities for, our operations.
Petra has initiated various climate change projections and
scenarios analysis to determine the impact on its operations in the
short, medium and long term. During FY 2022, mitigating
action plans were developed for the top rated climate change risks
that have been identified. Climate related disclosures were further
aligned to the Taskforce on Climate Related Financial Disclosure
(TCFD) recommendations. Petra will produce its second TCFD report
as part of its annual reporting process for FY 2022. |
13. Supply Chain
Governance |
Medium |
Medium |
Short to medium term |
Higher – a
comprehensive review of the Supply Chain function’s operating
structure and people competencies in line with Petra’s business
strategy is currently underway. Processes and systems across
the Supply Chain function are further being reviewed with the aim
of improving internal controls and governance. A new Third Party
Due Diligence Policy and Procedure and online platform is currently
being finalised to ensure that supplier risks relating to bribery
& corruption, sanctions, trade restrictions and human rights
violations are adequately identified and mitigated
accordingly. |
14. Capital Projects |
Medium |
High |
Short to medium term |
Higher – the CC1E
SLC and Lower Block 5 3-level SLC expansion projects at the
Cullinan and Finsch Mines were approved by the Board in FY 2022 and
as a result various governance initiatives have been launched to
ensure efficient and effective management of these projects,
including the identification and management of key project risks.
The Executive, Investment Committee and Board continue to regularly
monitor progress of both projects, including tracking of spend
against budgets and progress against the approved baseline
schedules. |
Richard Duffy
Chief Executive Officer
13 September 2022
Notes
The following definitions have been
used in this announcement:
- Exceptional Stones: diamonds with a valuation and selling
price of US$5m or more per
stone
- cpht: carats per hundred tonnes
- Kcts: thousand carats
- Kt: thousand tonnes
- LTI: lost time injury
- LTIFR: lost time injury frequency rate
- Mcts: million carats
- Mt: million tonnes
- FY: financial year
- CY: calendar year
- Q: quarter of the financial year
- ROM: run-of-mine (i.e. production from the primary
orebody)
- SLC: sub level cave
- m: million
PETRA DIAMONDS
LIMITED
CONDENSED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2022
US$ million |
Notes |
(Unaudited)
Year ended
30 June
2022 |
|
(Restated -
audited)
Year ended
30 June
20211 |
Revenue |
|
585.2 |
|
406.9 |
|
|
|
|
|
Mining and processing costs |
|
(391.5) |
|
(356.1) |
Other direct income |
|
(0.8) |
|
6.8 |
Corporate expenditure including
settlement costs |
5 |
(14.1) |
|
(40.8) |
Other corporate income |
|
0.6 |
|
— |
Impairment reversal / (charge) of
non-financial assets |
15 |
21.1 |
|
(38.7) |
Impairment (charge) / reversal other
receivables |
15 |
(1.5) |
|
0.3 |
Impairment of other receivables –
expected credit loss release |
15 |
— |
|
5.8 |
Total operating costs |
|
(386.2) |
|
(422.7) |
|
|
|
|
|
Profit on disposal of subsidiary
including associated impairment, net of tax |
16 |
— |
|
14.7 |
Financial income |
6 |
19.0 |
|
81.6 |
Financial expense |
6 |
(92.1) |
|
(74.2) |
Gain on extinguishment of Notes net
of unamortised costs |
6 |
— |
|
213.3 |
Profit before tax |
|
125.9 |
|
219.6 |
Income tax charge |
|
(37.8) |
|
(23.0) |
Profit for the Year |
|
88.1 |
|
196.6 |
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the parent
company |
|
69.0 |
|
187.1 |
Non-controlling interest |
|
19.1 |
|
9.5 |
|
|
88.1 |
|
196.6 |
|
|
|
|
|
Profit per share attributable to
the equity holders of the parent during the Year: |
|
|
|
|
Continuing operations: |
|
|
|
|
Basic earnings per share
– USc |
13 |
35.53 |
|
260.70 |
Diluted earnings per share –
USc |
13 |
35.53 |
|
260.70 |
|
|
|
|
|
|
|
|
|
|
1 The condensed consolidated income statement for
FY2021 has been restated with the operating results of Williamson
which were previously classified under loss on discontinued
operations, for further detail refer to note 17 and the basic and
diluted profit per share have been restated and adjusted for the 50
for 1 share consolidation which became effective in November 2021, in accordance with IAS 33 Earning
per Share, refer to note 13 for further detail.
PETRA DIAMONDS
LIMITED
CONDENSED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
US$ million |
|
(Unaudited)
Year ended
30 June
2022 |
|
(Restated -
audited)
Year ended
30 June
2021 |
Profit for the Year |
|
88.1 |
|
196.6 |
Exchange differences on translation
of the share-based payment reserve |
|
(0.3) |
|
0.2 |
Exchange differences on translation
of foreign operations1 |
|
(46.8) |
|
64.2 |
Exchange differences on
non-controlling interest1 |
|
(0.4) |
|
(1.2) |
Total comprehensive income for the
Year |
|
40.6 |
|
259.8 |
Total comprehensive income and
expense attributable to: |
|
|
|
|
Equity holders of the
parent company |
|
21.9 |
|
251.5 |
Non-controlling interest |
|
18.7 |
|
8.3 |
|
|
40.6 |
|
259.8 |
¹ These items will be reclassified to the consolidated income
statement if specific future conditions are met.
PETRA DIAMONDS
LIMITED
CONDENSED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE
2022
US$ million |
Notes |
(Unaudited)
30 June 2022 |
|
(Audited)
30 June
2021 |
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
7 |
633.2 |
|
696.8 |
Right-of-use assets |
|
21.9 |
|
1.2 |
BEE loans and receivables |
11 |
44.6 |
|
46.6 |
Other receivables |
|
2.6 |
|
— |
Total non-current assets |
|
702.3 |
|
744.6 |
Current assets |
|
|
|
|
Trade and other receivables |
|
49.8 |
|
50.7 |
Inventories |
|
70.6 |
|
59.9 |
Cash and cash equivalents (including
restricted amounts) |
|
288.2 |
|
163.8 |
Total current assets |
|
408.6 |
|
274.4 |
Non-current assets classified as
held for sale |
17 |
— |
|
59.6 |
Total assets |
|
1,110.9 |
|
1,078.6 |
EQUITY AND LIABILITIES |
|
|
|
|
Equity |
|
|
|
|
Share capital |
12 |
145.7 |
|
145.7 |
Share premium account |
|
959.5 |
|
959.5 |
Foreign currency translation
reserve |
|
(448.9) |
|
(402.1) |
Share-based payment reserve |
|
1.9 |
|
1.8 |
Other reserves |
|
(0.8) |
|
(0.8) |
Accumulated losses |
|
(183.6) |
|
(253.3) |
Attributable to equity holders of
the parent company |
|
473.8 |
|
450.8 |
Non-controlling interest |
|
4.7 |
|
(10.5) |
Total equity |
|
478.5 |
|
440.3 |
Liabilities |
|
|
|
|
Non-current liabilities |
|
|
|
|
Loans and borrowings |
8 |
353.9 |
|
400.0 |
Lease liabilities |
|
19.2 |
|
0.5 |
Provisions |
|
97.7 |
|
71.3 |
Deferred tax liabilities |
|
71.3 |
|
48.9 |
Total non-current
liabilities |
|
542.1 |
|
520.7 |
Current liabilities |
|
|
|
|
Loans and borrowings |
8 |
12.3 |
|
30.3 |
Lease liabilities |
|
3.2 |
|
0.5 |
Trade and other payables |
|
74.8 |
|
49.1 |
Provisions |
|
— |
|
4.2 |
Total current
liabilities |
|
90.3 |
|
84.1 |
Liabilities directly associated with
non-current assets classified as held for sale |
17 |
— |
|
33.5 |
Total liabilities |
|
632.4 |
|
638.3 |
Total equity and
liabilities |
|
1,110.9 |
|
1,078.6 |
In FY2021, the Company disclosed the net assets of the
Williamson mine under non-current assets held for sale and
liabilities directly associated with non-current assets held for
sale in the Statement of Financial Position. As at 30 June 2022 the Williamson assets and
liabilities have been re-consolidated, for further detail refer to
note 17.
PETRA DIAMONDS
LIMITED
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2022
US$ million |
Notes |
(Unaudited)
Year ended
30 June
2022 |
|
(Restated -
audited)
Year ended
30 June
20211 |
Profit before taxation for the
Year |
|
125.9 |
|
219.6 |
Depreciation of property plant and
equipment |
|
82.8 |
|
76.2 |
Amortisation of right-of-use
asset |
|
2.5 |
|
4.6 |
Unrealised gain on lease
liability |
|
— |
|
(3.7) |
Impairment (reversal) / charge – non
financial assets |
15 |
(21.1) |
|
38.7 |
Impairment (reversal) / charge–
other receivables |
15 |
1.5 |
|
(0.3) |
Impairment of BEE loans receivable –
expected credit loss (release) / charge |
11 |
— |
|
(5.8) |
Gain on extinguishment of Notes net
of unamortised costs |
6 |
— |
|
(213.3) |
Profit on disposal of
subsidiary |
16 |
— |
|
(14.7) |
Movement in provisions |
|
1.6 |
|
24.3 |
Dividend received |
|
(0.6) |
|
— |
Financial income |
6 |
(19.0) |
|
(81.6) |
Financial expense |
6 |
92.1 |
|
74.2 |
Loss/(profit) on disposal of
property, plant and equipment |
|
1.5 |
|
(0.6) |
Share based payment provision |
|
1.1 |
|
0.5 |
Operating profit before working
capital changes |
|
268.3 |
|
118.1 |
Increase in trade and other
receivables |
|
(7.1) |
|
(26.9) |
Increase in trade and other
payables |
|
24.5 |
|
5.5 |
(Increase) / decrease in
inventories |
|
(1.7) |
|
42.8 |
Cash generated from
operations |
|
284.0 |
|
139.5 |
Net realised gains / (losses) on
foreign exchange contracts |
|
12.6 |
|
(6.1) |
Finance expense |
|
(6.3) |
|
(6.7) |
Income tax (paid) / received |
|
(7.8) |
|
0.3 |
Net cash generated from operating
activities |
|
282.5 |
|
127.0 |
Cash flows from investing activities |
|
|
|
|
Acquisition of
property, plant and equipment |
|
(54.0) |
|
(19.4) |
Proceeds from sale of property,
plant and equipment |
|
— |
|
0.3 |
Loan repayment from / (advanced to)
BEE partners |
|
0.2 |
|
(7.0) |
Dividend paid to BEE partners |
|
(3.5) |
|
— |
Dividend received from BEE
partners |
|
0.6 |
|
— |
Repayment from KEMJV |
|
2.5 |
|
— |
Finance income |
|
1.3 |
|
0.7 |
Net cash utilised in investing
activities |
|
(52.9) |
|
(25.4) |
Cash flows from financing
activities |
|
|
|
|
Cash transaction costs settled –
Debt Restructuring |
|
— |
|
(29.9) |
Cash paid on lease liabilities |
|
(0.7) |
|
(0.7) |
Increase in borrowings |
|
— |
|
30.0 |
Repayment of borrowings |
|
(98.2) |
|
(7.4) |
Net cash generated from financing
activities |
|
(98.9) |
|
(8.0) |
|
|
|
|
|
Net increase in cash and cash
equivalents |
|
130.7 |
|
93.6 |
Cash and cash equivalents at
beginning of the Year |
|
156.9 |
|
53.6 |
Effect of exchange rate fluctuations
on cash held |
|
(15.7) |
|
9.7 |
Cash and cash equivalents at end
of the Year2 |
|
271.9 |
|
156.9 |
¹ The condensed consolidated statement of cash flows for FY2021
has been restated with the operating results of Williamson which
were previously classified under loss on discontinued operations,
for further detail refer to note 17.
2 Cash and cash equivalents in the Consolidated
Statement of Financial Position includes restricted cash of
US$16.3 million (30 June 2021: US$16.1
million) and unrestricted cash of US$271.9 million (30 June
2021: US$147.7 million
(excludes unrestricted cash attributable to Williamson of
US$9.2 million)).
PETRA DIAMONDS
LIMITED
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
|
|
|
|
|
|
(Unaudited)
US$ million |
Share
capital |
Share
premium
account |
Foreign
currency
translation
reserve |
Share-based
payment
reserve |
Other
reserves |
At 1 July 2021 |
145.7 |
959.5 |
(402.1) |
1.8 |
(0.8) |
Profit for the Year |
— |
— |
— |
— |
— |
Other comprehensive (expense) /
income |
— |
— |
(46.8) |
(0.3) |
— |
Dividend paid to Non-controlling
interest shareholders |
— |
— |
— |
— |
— |
Equity settled share based
payments |
— |
— |
— |
1.1 |
— |
Transfer between reserves - equity
settled share based payments |
— |
— |
— |
(0.7) |
— |
At 30 June 2022 |
145.7 |
959.5 |
(448.9) |
1.9 |
(0.8) |
|
|
|
|
|
(Unaudited)
US$ million |
Accumulated losses |
Attributable
to the
parent |
Non-controlling
interest |
Total
equity |
At 1 July 2021 |
(253.3) |
450.8 |
(10.5) |
440.3 |
Profit for the Year |
69.0 |
69.0 |
19.1 |
88.1 |
Other comprehensive (expense) /
income |
— |
(47.1) |
(0.4) |
(47.5) |
Dividend paid to Non-controlling
interest shareholders |
— |
— |
(3.5) |
(3.5) |
Equity settled share based
payments |
— |
1.1 |
— |
1.1 |
Transfer between reserves - equity
settled share based payments |
0.7 |
— |
— |
— |
At 30 June 2022 |
(183.6) |
473.8 |
4.7 |
478.5 |
PETRA DIAMONDS
LIMITED
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
|
|
|
|
|
|
(Audited)
US$ million |
Share
capital |
Share
premium
account |
Foreign
currency
translation
reserve |
Share-based
payment
reserve |
Other
reserves |
At 1 July 2020 |
133.4 |
790.2 |
(453.0) |
1.1 |
(0.8) |
Profit for the Year |
— |
— |
— |
— |
— |
Other comprehensive income /
(expense) |
— |
— |
64.2 |
0.2 |
— |
Recycling of foreign currency
translation reserve on disposal of Sekaka |
— |
— |
(13.3) |
— |
— |
Equity settled share based
payments |
— |
— |
— |
0.5 |
— |
Allotments during the Year: |
|
|
|
|
|
- Ordinary shares – Debt for equity
issue (net of US$12.3 million issue costs) |
12.3 |
169.3 |
— |
— |
— |
At 30 June 2021 |
145.7 |
959.5 |
(402.1) |
1.8 |
(0.8) |
|
|
|
|
|
(Audited)
US$ million |
Accumulated losses |
Attributable
to the
parent |
Non-controlling
interest |
Total
equity |
At 1 July 2020 |
(440.4) |
30.5 |
(18.8) |
11.7 |
Profit for the Year |
187.1 |
187.1 |
9.5 |
196.6 |
Other comprehensive income /
(expense) |
— |
64.4 |
(1.2) |
63.2 |
Recycling of foreign currency
translation reserve on disposal of Sekaka |
— |
(13.3) |
— |
(13.3) |
Equity settled share based
payments |
— |
0.5 |
— |
0.5 |
Allotments during the Year: |
|
|
|
|
- Ordinary shares – Debt for equity
issue (net of US$12.3 million issue costs) |
— |
181.6 |
— |
181.6 |
At 30 June 2021 |
(253.3) |
450.8 |
(10.5) |
440.3 |
NOTES TO THE CONDENSED CONSOLIDATED
PRELIMINARY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022
1. GENERAL
INFORMATION
Petra Diamonds Limited (the “Company”), a limited liability
company listed on the Main Market of the London Stock Exchange, is
registered in Bermuda with its
Group management office domiciled in the United Kingdom. The Consolidated Interim
Financial Statements of the Company for the year ended 30 June 2022 comprise the Company and its
subsidiaries, joint operations and associates (together referred to
as the “Group”).
2. ACCOUNTING
POLICIES
This preliminary report, which is unaudited, does not include
all the notes of the type normally included in an annual financial
report. This condensed report is to be read in conjunction with the
Annual Report for the year ended 30 June
2021, and any public announcements made by the Group during
the reporting period. The annual financial report for the year
ended 30 June 2021 was prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (“IFRS’s”) and the accounting
policies applied in this condensed preliminary report are
consistent with the polices applied in the annual financial report
for the year ended 30 June 2021
unless otherwise noted. The preliminary report has been prepared in
accordance with accounting policies compliant with International
Financial Reporting Standards as adopted by the European Union.
Basis of preparation including going
concern
The twelve-month period to 30 June
2022 delivered US$264.9
million in EBITDA and US$230.0
million in operational free cash flow for the Group, while
Consolidated Net Debt reduced from $228.2
million as at 30 June 2021 to
US$40.6 million at 30 June 2022.
Production
Production at both CDM and FDM were generally in line with
guidance. The Group’s overall production also benefitted with the
restart of operations at Williamson during Q1 FY2022 following an
18-month period of care and maintenance, with Williamson ramping up
towards steady-state operations. During the Year, the Group also
announced expansion capital projects at both the Cullinan and
Finsch Mines, which will extend their Life of Mine plans to 2031
and 2030 respectively. The expansion project at Cullinan Mine is
progressing well, while the expansion project at Finsch is slightly
behind schedule on account of delay in delivery of long-lead items
given the global disruption in supply chains experienced over the
past 6 months. Both projects, however, remain within guidance for
cost and schedule, as mitigation steps have been identified and
being implemented to catch-up on the schedule delays at Finsch.
Diamond prices and diamonds market
Diamond prices strengthened over FY 2022, with a 41.5% increase
on a like-for-like basis compared to the preceding twelve-month
period. In addition, CDM’s run of Exceptional Stone recovery and
sales continued with a total of US$75.2
million realised in the Year. Williamson also benefited from
the sale of an exceptional pink diamond at its first tender after
restarting operations, yielding $13.8
million and significantly de-risking Williamson’s own
liquidity profile.
The market witnessed robust price recovery and are now close to
prices last seen during pre-COVID-19 levels. In general, the market
is supported by a fundamental supply deficit, with robust demand
recovery experienced post COVID-19. While some of the price
recovery may have been helped by sanctions on Russian goods, it
appears that these goods have continued to flow into the market.
From a demand perspective, the Chinese lockdown has moderated
demand for certain categories of polished goods, while the rising
inflation and interest rate cycles may impact disposable income and
therefore further moderate/reduce short-term demand for diamonds.
This may lead to some short-term price volatility, but the
medium-long term supply/demand fundamentals are expected to support
the diamond price outlook.
Williamson framework agreement and MOU
The Group announced reaching a framework agreement with the
Government of Tanzania in
December 2021, which sets out key
principles on the economic benefit sharing amongst shareholders,
treatment of outstanding VAT balances, as well as agreement reached
on the blocked parcel of diamonds and settlement of historic
disputes, amongst others. This agreement should provide important
fiscal stability for the mine and its investors and is expected to
become effective during the first half of FY2023, pending
completion of certain suspensive conditions. At the same time,
Petra also announced entering into a Memorandum of Understanding
(MOU) with Caspian Ltd to sell 50% less 1 share of Petra’s stake in
Williamson to this Tanzanian company for a purchase consideration
of US$15 million, which is also
expected to be effective in the first half of FY2023.
COVID-19
Petra’s approach to managing COVID-19 has seen the Group not
experiencing interruptions to our day-to-day operational/business
activities specifically related to COVID-19 during the Year. During
FY2022, we successfully reverted to hosting all of our tenders for
our South African goods in South
Africa, while the Williamson goods continue to be auctioned
in Belgium (as per our normal
tender process for Williamson goods).
South African banking facilities
During the Year, the South African banking facilities held with
the Group’s previous consortium of South African lenders were
settled and cancelled, comprising of the revolving credit facility
of ZAR404.6 million (US$24.9 million) (capital plus interest) and the
term loan of ZAR893.2 million
(US$54.9 million) (capital plus
interest).
The Group entered into a new ZAR 1
billion senior Revolving Credit Facility (RCF) facility in
June 2022. The Group will benefit
from reduced interest rates compared to the previous facilities
coupled with more appropriate leverage-based covenants (Net Debt :
EBITDA, Interest Cover Ratio and minimum liquidity). This new
facility has a longer tenure, with the facility expiring on
January 7, 2026. As at June 30, 2022, the RCF remains undrawn, with the
Group having access to the full ZAR 1
billion (US$ 61.5
million).
The factors above, coupled with the further significant progress
towards stabilising the Group’s balance sheet and strengthening
cash reserves as at the date of this report positions the Group
well for this Going Concern period.
Forecast liquidity and covenants
The Board has reviewed the Group’s forecasts with various
sensitivities applied for the 18 months to December 2023,
including both forecast liquidity and covenant measurements. As per
the First Lien agreements, the liquidity and covenant measurements
exclude contributions from Williamson’s trading results and only
recognises cash distributions payable to Petra upon forecasted
receipt, or Petra’s funding obligations towards Williamson upon
payment.
Debt tender offer
The Group intends to reduce its gross debt through a tender
offer to bondholders to purchase up to US$150 million of the Senior Secured Second Lien
Notes due in 2026 in line with our stated intent to further
optimise our capital structure through a reduction of gross
debt. If completed, the transaction will see Petra saving up
to US$15 million per annum in
interest expenses while we remain confident in our liquidity
outlook to continue to fund our ongoing capital programmes from
existing and internally generated cash resources.
The Board has given careful consideration to potential risks
identified in meeting the forecasts under the review period. The
following sensitivities have been performed in assessing the
Group’s ability to operate as a going concern (in addition to the
Base Case) at the date of this report:
- a 10% decrease in forecast rough diamond prices from
July 2022 to Dec 2023
- a 10% strengthening in the forecast South African Rand (ZAR)
exchange rate from July 2022 to
Dec 2023
- a 10% increase in Operating Costs from July 2022 to Dec
2023
- a US$15 million reduction in
revenue contribution from Exceptional Stones
- a production disruption sensitivity assuming no carat
production across the Group’s operations for a period of two weeks
in February 2023 (could be due to
extreme weather conditions or supply chain events or any other
unexpected event)
- Combined sensitivity: Prices down 10% and ZAR stronger by 10%
and Exceptional Stones contributions reduced by US$15 million and Operating Costs up 5%
Under all the cases, the forecasts indicate the Group’s
liquidity outlook over the 18-month period to December 2023 remains strong, even when applying
the above sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the
new First Lien facility do not indicate any breaches during the
18-month review period for the base case as well as all the above
sensitivities, except for the worse case combined sensitivity,
which shows a covenant breach for the required interest cover ratio
in the December 2023. While the ICR
is projected to be breached in this combined sensitivity, both the
Net Debt : EBITDA covenant and the liquidity covenant remain
healthy, while the RCF remains undrawn. It is therefore assumed
that the RCF remains available, with the 1L lender assumed to agree
to an ICR covenant waiver, given that the Group does not expect to
utilise the RCF for servicing of its 2L interest obligations.
Furthermore, this potential ICR breach may be cured by means of
reducing of our gross debt by utilising our cash reserves and/or
marginally increasing our EBITDA for the preceding 12-month
period.
Conclusion
The Board is of the view that the longer-term fundamentals of
the diamond market remain sound and that the Group will continue to
benefit from the recently embedded new operating model throughout
the review period and beyond.
Based on its assessment of the forecasts, principal risks and
uncertainties and mitigating actions considered available to the
Group in the event of downside scenarios, the Board confirms that
it is satisfied the Group will be able to continue to operate and
meet its liabilities as they fall due over the going concern period
to December 2023. Accordingly, the
Board have concluded that the going concern basis in the
preparation of the financial statements is appropriate and that
there are no material uncertainties that would cast doubt on that
basis of preparation.
New standards and interpretations
applied
The IASB has issued new standards, amendments and
interpretations to existing standards with an effective date on or
after 1 July 2021 which are not
considered to have a material impact on the Group during the Period
under review.
New standards and interpretations not
yet effective
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory for the
Group’s accounting periods beginning after 1
July 2022 or later periods. The only standard which is
anticipated to be significant or relevant to the Group is:
Amendments to IAS 1: Classification
of Liabilities as Current or Non-current
Amendments to IAS 1, which are intended to clarify the
requirements that an entity applies in determining whether a
liability is classified as current or non-current. The amendments
are intended to be narrow scope in nature and are meant to clarify
the requirements in IAS 1 rather than modify the underlying
principles. The amendments include clarifications relating to:
- how events after the end of the reporting period affect
liability classification;
- what the rights of an entity must be in order to classify a
liability as non-current;
- how an entity assesses compliance with conditions of a
liability (e.g. bank covenants); and
- how conversion features in liabilities affect their
classification.
The amendments were originally effective for periods beginning
on or after 1 January 2022 which was
deferred to 1 January 2023 by the
IASB in July 2020. Earlier
application is permitted but Amendments to IAS 1 has not yet been
endorsed for application by the European Union.
Significant assumptions and
judgements:
The preparation of the condensed consolidated interim financial
statements requires management to make estimates and judgements and
form assumptions that affect the reported amounts of the assets and
liabilities, reported revenue and costs during the periods
presented therein, and the disclosure of contingent liabilities at
the date of the interim financial statements. Estimates and
judgements are continually evaluated and based on management’s
historical experience and other factors, including future
expectations and events that are believed to be reasonable. The
estimates and assumptions that have a significant risk of causing a
material adjustment to the financial results of the Group in future
reporting periods are discussed below.
Key estimates and judgements:
Impairment reviews
The Group prepares impairment models and assesses mining assets
for impairment or reversals of previous impairments. While
conducting an impairment test of its assets using recoverable
values using the current life of mine plans, the Group exercised
judgement in making assumptions about future rough diamond prices,
foreign exchange rates, volumes of production, ore reserves and
resources included in the current life of mine plans, future
development and production costs and factors such as inflation and
discount rates. Changes in estimates used can result in significant
changes to the ‘Consolidated Income Statement’ and ‘Statement of
Financial Position’.
Cullinan, Finsch,
Koffiefontein and Williamson
The impairment tests for the Cullinan and Finsch Mines indicated
no further impairment charges or reversals to be recognised. The
impairment test for Koffiefontein indicated an impairment of
US$0.3 million on a carrying value of
the Group’s property, plant and equipment of US$608.2 million (pre-impairment). This follows
US$17.3 million recognised at
30 June 2021 (comprising Finsch
impairment of US$15.1 million and
Koffiefontein impairment of US$2.2
million) on a carrying value of the Group’s property, plant
and equipment of US$711.8 million
(pre-impairment) at the time of recognition. The Group also
recognised an impairment reversal of US$21.4
million relating to an IFRS 5 impairment adjustment for
Williamson as the results for Williamson have been re-consolidated
in FY2022. For further details of the inputs, assumptions and
sensitivities in the impairment model, refer to note 15.
Recoverability and ownership of
diamond parcel in Tanzania
The Group holds diamond inventory valued at US$12.5 million (30 June
2021: US$10.6 million) in the
Statement of Financial Position in respect of the Williamson mine’s
confiscated diamond parcel. The diamond inventory parcel was
written up from the net realisable value of prior periods to cost
during the current year. The recommencing of operations and the
sales tenders at Williamson during the Year provided additional
information for management to assess the value of the diamond
parcel and was the basis used to revalue the diamond parcel to the
lower of cost or net realisable value. During FY 2018, an
investigation into the Tanzanian diamond sector by a parliamentary
committee in Tanzania was
undertaken to determine if diamond royalty payments were being
understated. In connection with this, Petra announced on
11 September 2017 that a parcel of
diamonds (71,654.45 carats) from the Williamson mine in
Tanzania (owned 75% by Petra and
25% by the Government of the United Republic of Tanzania (“GoT”)) had been blocked for export
to Petra’s marketing office in Antwerp.
The assessment of the recoverability of the diamond parcel
required significant judgement. In making such a judgement, the
Group considered the Framework Agreement that was signed with
the GoT on 13 December 2021,
confirmation was received from the GoT in FY 2018 that they held
the diamond parcel of 71,654.45 carats, ongoing discussions held
with the GoT, an assessment of the internal process used for the
sale and export of diamonds confirming such process is in full
compliance with legislation in Tanzania and the Kimberley Process, and legal
advice received from the Group’s in-country attorneys which
supports the Group’s position.
The Framework Agreement which refers to the diamond parcel as
the “Government Diamond Parcel” sets out that the proceeds from the
sale of the Parcel will flow to Williamson Diamonds Limited
(“WDL”).
While a resolution has not yet been reached with regards to the
mechanism to sell the parcel of diamonds that was blocked from
export, based on the above judgements and assessment thereof,
management remain confident that based on the signed Framework
Agreement, and the legal advice received from the Group’s
in-country attorneys, the diamond parcel will be made available for
future sale, and that WDL will derive future economic benefit from
the sales proceeds.
Recoverability of VAT in Tanzania
The Group has VAT receivable of US$2.7
million (30 June 2021:
US$0.7 million) in respect of the
Williamson mine, all of which are past due and have therefore been
classified, after provision including amounts related to providing
for a time-value of money inclusive of risk adjustments for various
factors, as non-current given the potential delays in receipt.
The VAT receivable as at 30 June
2022, can be split into three identifiable component time
periods as set out below:
US$ million |
VAT Receivable |
Provision |
Written off |
Carrying value |
July 2017 to June 2020 |
26.9 |
— |
(26.9) |
— |
Pre July 2017 and Post June
2020 |
8.6 |
(6.0) |
— |
2.6 |
|
35.5 |
(6.0) |
(26.9) |
2.6 |
July
2017 to June 2020
A further US$26.9.million
(30 June 2021: US$26.9 million) of VAT is receivable which
relates to VAT under the legislation, effective from July 2017 to 30 June
2020.
In prior periods management considered the amendment to the VAT
legislation for the period July 2017
to July 2020 and based on legal
advice and the confirmed application of the legislation by the TRA
considered that the input VAT was not recoverable and a full
provision was recorded in prior periods. Further to this, the
Framework Agreement provisions do not allow for offsetting of these
historically disputed amounts and as such the full US$26.9 million has been written off. There
has been no income statement impact as a result of this write-off
as the US$26.9 million was fully
provided for in prior periods.
Pre July
2017 and Post June 2020
An amount of US$8.6 million
(30 June 2021: US$2.6 million) of VAT is receivable for the
period pre July 2017 and subsequent
to 1 July 2020. During FY2021, the
Group received US$10.0 million in VAT
refunds from the Tanzanian Revenue Authority in respect of the pre
July 2017 period and US$1.2 million was disallowed by the Tanzanian
Revenue Authority.The Group is considering various alternatives in
pursuing payment in accordance with legislation. A provision of
US$6.0 million, given the uncertainty
around the timing of receipts of the amount outstanding, has been
provided for against the US$8.6
million receivable resulting in a carrying value of
US$2.6 million.
While the remaining pre July 2017
and post 1 July 2020 VAT balance is
considered receivable, significant uncertainty exists regarding the
timing of receipt. A discount rate of 14.00% has been applied to
the expected cash receipts inclusive of estimated country credit
risk. A 1% increase in the discount rate would increase the
provision by US$0.04 million and a
one year delay would increase the provision by US$0.1 million.
The provision against the VAT balance is US$6.0 million (30 June
2021: US$28.8 million). The
provision relates to US$6.0 million
that is recorded against the pre July
2017 and post June 2020
amount. The full disputed July 2017
to June 2020 amount of US$
US$26.9 million, which was fully
provided for as at 30 June 2021 has
been written off. During the Year, an impairment charge of
US$4.1 million (30 June 2021: US$0.7
million (impairment reversal recognised in the Loss on
discontinued operations)) was recognised in the Consolidated Income
Statement.
BEE receivables – expected credit loss
provision
The Group has applied the expected credit loss impairment model
to its BEE loans receivable. In determining the extent to which
expected credit losses may apply, the Group assessed the future
free cashflows to be generated by the mining operations, based on
the current mine plans. In assessing the future cashflows, the
Group considered the diamond price outlook and the probability of
reaching an offset agreement. Based on the assessment, the analysis
generated an expected credit loss charge/reversal totalling US$nil
(30 June 2021: US$5.8 million expected credit loss reversal),
comprising of US$nil provision charge/reversal in respect of the
Cullinan and Finsch Mines (30 June
2021: US$5.8 million provision
comprising of US$6.1 million
provision reversal in respect of the Cullinan and Finsch Mines and
US$0.3 million expected credit loss
provision in respect of Koffiefontein).
Life of mine and ore reserves and
resources
There are numerous risks inherent in estimating ore reserves and
resources and the associated current life of mine plan. The life of
mine plan is the current approved management plan for ore
extraction that considers specific resources and associated capital
expenditure. The life of mine plan frequently includes less tonnes
than the total reserves and resources that are set out in the
Group’s Resource Statement and which management may consider to be
economically viable and capable of future extraction.
Management must make a number of assumptions when making
estimates of reserves and resources, including assumptions as to
exchange rates, rough diamond and other commodity prices,
extraction costs, recovery and production rates. Any such estimates
and assumptions may change as new information becomes available.
Changes in exchange rates, commodity prices, extraction costs,
recovery and production rates may change the economic viability of
ore reserves and resources and may ultimately result in the
restatement of the ore reserves and resources and potential
impairment to the carrying value of the mining assets and life of
mine plans.
The current life of mine plans are used to determine the ore
tonnes and capital expenditure in the impairment tests. Ore
reserves and resources, both those included in the life of mine and
certain additional tonnes which form part of reserves and resources
considered to be sufficiently certain and economically viable, also
impact the depreciation of mining assets depreciated on a unit of
production basis. Ore reserves and resources, outside the current
mine plan further impact the estimated date of decommissioning and
rehabilitation.
Restructuring (30 June 2021)
Transaction costs associated with the restructuring exercise
were apportioned to the listed debt, equity issued and ZAR banking
facilities based on the value of each element at the date of
restructuring.
Williamson
Diamond Mine (30 June
2022)
At 30 June 2021, the accounting
treatment of Williamson as an AHFS was in line with the conditions
required under IFRS 5 Asset Held for Sale and Discontinued
Operations.
During the current Year, an amended MOU was entered into with
Caspian. Per the amended MOU,
the Put Option in the Draft MOU was removed and PDL will now
sell 50% less one share in the entity that holds Petra’s shares in
WDL to Caspian. With the amendment
to the MOU an assessment was required to determine if Williamson
still met the asset held for sale criteria or if Williamson
(through the proposed shareholding structure in the MOU) should be
reconsolidated into the results of the Group. Consideration was
also given on the long-term intention of Williamson remaining in
the Group for the foreseeable future.
IFRS 10 Consolidated Financial Statements sets out the criteria
required for a company to consolidate an entity in which it has an
investment or interest in. A company determines whether it is a
parent by assessing whether it controls one or more investees,
considering all relevant facts, circumstances and rights (through
voting rights) to variable returns from its involvement with the
investee and has the ability to affect those returns through its
power over the investee.
An investor controls an investee if and only if the investor has
all of the following elements:
- power over the investee, i.e. the investor has existing rights
that give it the ability to direct the relevant activities (the
activities that significantly affect the investee's
returns);
- exposure, or rights, to variable returns from its involvement
with the investee; and
- the ability to use its power over the investee to affect the
amount of the investor's returns.
Management considered the terms of the MOU where the Company
will retain a 50% plus one share shareholding in the entity that
holds Petra’s shares in WDL which entity will have a right to
appoint three directors to WDL’s Board, thus having the ability to
use its power to affect the decision making and the strategy of
WDL. The Framework Agreement sets out a change in the shareholdings
in WDL whereby the Government of Tanzania (GoT) shall receive a 16% free carry
interest, as required by local legislation, while GoT’s existing
25% shareholding, as well as Petra’s existing 75% shareholding will
dilute to 21% and 63% respectively. The structure of the WDL Board
comprises 5 Board members, comprising three appointments by the
entity that holds Petra’s shares in WDL and the remaining two Board
members being GoT representatives. Petra will, through its control
of the entity that holds Petra’s shares in WDL, therefore control
WDL.
Based on the Group meeting the requirements of control under
IFRS 10 and the intention that the Group will not dispose of its
remaining interest in Williamson in the near future, Williamson is
longer considered to be an asset held for sale at 30 June 2022 and has been reconsolidated into the
Group results for the Year refer to note 17 for further detail.
Taxation
The Group operates in South
Africa and Tanzania, and
accordingly it is subject to, and pays annual income taxes under
the various income tax regimes in the countries in which it
operates. From time to time the Group is subject to a review of its
income tax filings and in connection with such reviews, disputes
can arise with the taxing authorities over the interpretation or
application of certain rules to the Group's business conducted
within the country involved. Management evaluates each of the
assessments and recognises a provision based on its best estimate
of the ultimate resolution of the assessment, through either
negotiation or through a legal process.
Other key estimates and judgements
In addition to the key estimates and judgements disclosed above,
the following estimates and judgements have not significantly
changed from those disclosed in the FY 2021 Annual Report and will
be discussed in further detail in the FY 2022 Annual Report:
- Provision for rehabilitation
- Inventory and inventory stockpile
- Depreciation
- Pension and post-retirement medical fund schemes
- Net investments in foreign operations
3. DIVIDENDS
No dividends have been declared in respect of the Year under
review (30 June 2021: US$nil).
4. SEGMENTAL
INFORMATION
Segment information is presented in respect of the Group’s
operating and geographical segments:
Mining – the extraction and sale of rough diamonds from mining
operations in South Africa and
Tanzania.
Corporate – administrative activities in the United Kingdom.
Beneficiation – beneficiation activities in South Africa.
Exploration assets in Botswana
were disposed of during FY 2021 via the sale of the Group’s
interest in Sekaka Diamonds Exploration (Pty) Ltd.
Segments are based on the Group’s management and internal
reporting structure. Management reviews the Group’s performance by
reviewing the results of the mining activities in South Africa, Tanzania and reviewing the results of
reviewing the corporate administration expenses in the United Kingdom. Each segment derives, or aims
to derive, its revenue from diamond mining and diamond sales,
except for the corporate and administration cost centre.
Segment results, assets and liabilities include items directly
attributable to a segment, as well as those that can be allocated
on a reasonable basis. Segment results are calculated after
charging direct mining costs, depreciation and other income and
expenses. Unallocated items comprise mainly interest-earning assets
and revenue, interest-bearing borrowings and expenses and corporate
assets and expenses. Segment capital expenditure is the total cost
incurred during the year to acquire segment assets that are
expected to be used for more than one period. Eliminations comprise
transactions between Group companies that are cancelled on
consolidation. The results are not materially affected by seasonal
variations. Revenues are generated from tenders held in
South Africa and Antwerp for external customers from various
countries, the ultimate customers of which are not known to the
Group.
4.
SEGMENTAL
INFORMATION (continued)
Operating segments
*** |
South Africa – Mining activities |
Tanzania -Mining activities |
US$ million |
Cullinan |
Finsch |
Koffiefontein |
Williamson |
|
2022 |
2022 |
2022 |
2022 |
Revenue¹ |
322.4 |
165.7 |
21.5 |
75.9 |
Segment
result2 |
154.4 |
34.8 |
(13.8) |
22.2 |
Impairment charge –
operations |
— |
— |
(0.3) |
21.4 |
Impairment reversal /
(charge) – other receivables |
— |
— |
— |
(4.1) |
Other direct income /
(loss) |
(0.7) |
(0.4) |
0.2 |
0.1 |
Operating profit /
(loss)3 |
153.7 |
34.4 |
(13.9) |
39.6 |
Financial income |
|
|
|
|
Financial expense |
|
|
|
|
Income tax charge |
|
|
|
|
Non-controlling
interest |
|
|
|
|
Profit attributable to
equity holders of the parent company |
|
|
|
|
Segment assets |
463.9 |
229.8 |
6.0 |
123.2 |
Segment
liabilities |
384.0 |
111.2 |
17.1 |
75.1 |
Capital
expenditure |
35.0 |
12.0 |
0.6 |
3.3 |
Operating segments
*** |
United
Kingdom |
South Africa |
|
|
US$ million |
Corporate and
treasury |
Beneficiation4 |
Inter-segment |
Consolidated |
|
2022 |
2022 |
2022 |
2022 |
Revenue¹ |
— |
2.2 |
(2.5) |
585.2 |
Segment
result2 |
(14.1) |
0.4 |
(4.3) |
179.6 |
Impairment charge –
operations |
— |
— |
— |
21.1 |
Impairment reversal /
(charge) – other receivables |
2.6 |
— |
— |
(1.5) |
Other direct income /
(loss) |
0.6 |
— |
— |
(0.2) |
Operating profit /
(loss)3 |
(10.9) |
0.4 |
(4.3) |
199.0 |
Financial income |
|
|
|
19.0 |
Financial expense |
|
|
|
(92.1) |
Income tax charge |
|
|
|
(37.8) |
Non-controlling
interest |
|
|
|
(19.1) |
Profit attributable to
equity holders of the parent company |
|
|
|
69.0 |
Segment assets |
3,575.2 |
5.1 |
(3,292.3) |
1,110.9 |
Segment
liabilities |
2,430.1 |
5.9 |
(2,391.0) |
632.4 |
Capital
expenditure |
1.6 |
— |
(0.3) |
52.2 |
¹ The Group’s revenue comprises the sale of rough diamonds and
polished stones. The sale of rough diamonds contributed
US$584.1 million (30 June 2021: US$406.6
million) with polished stones contributing US$3.3 million (30 June
2021: US$0.3 million).
Included within the US$3.3 million
polished stones contribution is US$1.1
million from a profit share agreement.
2 Total depreciation of US$82.8 million included in the segmental result
comprises depreciation incurred at the Cullinan Mine US$52.5 million, Finsch US$24.4 million, Koffiefontein US$0.3 million, Williamson US$5.0 million and Corporate and treasury
US$0.6 million.
3 Operating profit is equivalent to revenue of
US$585.2 million less total costs of
US$386.2 million as disclosed in the
Consolidated Income Statement.
4 The beneficiation segment represents Tarorite, a
cutting and polishing business in South
Africa, which can on occasion cut and polish select rough
diamonds.
4.
SEGMENTAL
INFORMATION (continued)
Operating
segments |
South Africa – Mining activities |
Tanzania -Mining activities |
Botswana |
US$ million |
Cullinan |
Finsch |
Koffiefontein |
Williamson |
Exploration4 |
|
2021 |
2021 |
2021 |
2021 |
2021 |
Revenue |
250.6 |
123.5 |
27.9 |
4.6 |
— |
Segment result¹ |
76.8 |
(0.5) |
(8.1) |
(14.3) |
— |
Impairment charge –
operations |
— |
(15.1) |
(2.2) |
(21.4) |
— |
Impairment charge –
other receivables |
— |
— |
— |
0.7 |
— |
Impairment of BEE
loans receivable – expected credit loss release |
— |
— |
— |
— |
— |
Expenditure for
unsettled and disputed tax claims |
— |
— |
— |
(19.5) |
— |
Other direct
income |
0.6 |
1.0 |
0.1 |
5.1 |
— |
Operating profit /
(loss)² |
77.4 |
(14.6) |
(10.2) |
(49.4) |
— |
Financial income |
|
|
|
|
|
Financial expense |
|
|
|
|
|
Gain on extinguishment
of Notes and unamortised costs |
|
|
|
|
|
Profit on disposal of
subsidiary |
|
|
|
|
|
Income tax charge |
|
|
|
|
|
Non-controlling
interest |
|
|
|
|
|
Profit attributable to
equity holders of the parent company |
|
|
|
|
|
Segment assets |
559.0 |
249.9 |
6.9 |
59.6 |
— |
Segment
liabilities |
559.2 |
119.7 |
22.1 |
33.5 |
— |
Capital
expenditure |
16.8 |
4.0 |
1.7 |
0.3 |
— |
Operating
segments |
United
Kingdom |
South Africa |
|
|
US$ million |
Corporate and
treasury |
Beneficiation3 |
Inter-segment |
Consolidated |
|
2021 |
2021 |
2021 |
|
Revenue |
— |
0.3 |
— |
406.9 |
Segment result¹ |
(21.2) |
(1.6) |
(1.6) |
29.5 |
Impairment charge –
operations |
— |
— |
— |
(38.7) |
Impairment charge –
other receivables |
(0.4) |
— |
— |
0.3 |
Impairment of BEE
loans receivable – expected credit loss release |
5.8 |
— |
— |
5.8 |
Expenditure for
unsettled and disputed tax claims |
— |
— |
— |
(19.5) |
Other direct
income |
— |
— |
— |
6.8 |
Operating profit /
(loss)² |
(15.8) |
(1.6) |
(1.6) |
(15.8) |
Financial income |
|
|
|
81.6 |
Financial expense |
|
|
|
(74.2) |
Gain on extinguishment
of Notes and unamortised costs |
|
|
|
213.3 |
Profit on disposal of
subsidiary |
|
|
|
14.7 |
Income tax charge |
|
|
|
(23.0) |
Non-controlling
interest |
|
|
|
(9.5) |
Profit attributable to
equity holders of the parent company |
|
|
|
187.1 |
Segment assets |
3,488.7 |
4.5 |
(3,290.0) |
1,078.6 |
Segment
liabilities |
2,134.7 |
5.5 |
(2,236.4) |
638.3 |
Capital
expenditure |
1.0 |
— |
— |
23.8 |
¹ Total depreciation of US$76.2
million included in the segmental result comprises
depreciation incurred at the Cullinan Mine of US$52.2 million, Finsch of US$23.0 million, Koffiefontein US$ 0.1 million, Williamson US$0.3 million and Corporate and treasury of
US$0.6 million.
² Operating loss is equivalent to revenue of US$406.9 million less total costs of US$422.7 million as disclosed in the Consolidated
Income Statement.
3 The beneficiation segment represents Tarorite, a
cutting and polishing business in South
Africa, which on occasion cuts and polishes select rough
diamonds.
4 In FY 2021, Petra sold its exploration assets in
Botswana to Botswana Diamonds PLC
via the sale of its interest in Sekaka Diamonds Exploration (Pty)
Ltd, refer to note 16 for further detail.
US$ million |
|
2022 |
|
Restated 2021 |
5. CORPORATE
EXPENDITURE |
|
|
|
|
|
|
|
|
|
Corporate expenditure includes: |
|
|
|
|
Depreciation of property, plant and
equipment |
|
0.6 |
|
0.6 |
Amortisation of right-of-use
asset |
|
0.2 |
|
0.3 |
London Stock Exchange and other
regulatory expenses |
|
1.5 |
|
1.5 |
Unsettled and disputed tax claims at
Williamson¹ |
|
— |
|
19.5 |
Settlement (reversal) / costs –
human rights claims at Williamson2 |
|
(0.8) |
|
12.7 |
Share-based expense – Directors and
management |
|
1.1 |
|
0.5 |
Other staff costs |
|
5.1 |
|
2.3 |
Total staff costs |
|
6.2 |
|
2.8 |
1 During FY2021 the Company provided for costs in
respect of unsettled and disputed tax claims in respect of
Williamson as set out in the Framework Agreement.
2 During FY2021, the settlement costs for the human
rights claims at Williamson comprised US$4.8
million for the part settlement of the claimant’s legal
costs and for distribution to the claimants and US$1.3 million to invest in programmes dedicated
to providing sustainable support to the communities living around
the Williamson mine as a condition of the Settlement. The Company
incurred and provided for additional total costs of US$6.6 million relating to this matter, the
majority of which relate to legal, consultant, investigation and
expert fees.
3 Included in corporate expenditure and mining and
processing costs for FY2021 are COVID-19 TERS payments received
from the South African government of US$0.3
million and US$1.4 million
respectively. No COVID-19 TERS payments were received during
FY2022.
6. FINANCING (EXPENSE) /
INCOME
US$ million |
|
2022 |
|
Restated 2021 |
|
|
|
|
|
Net unrealised foreign exchange
gains |
|
— |
|
74.6 |
Interest received on BEE loans and
other receivables |
|
4.1 |
|
5.4 |
Interest received bank deposits |
|
1.3 |
|
0.7 |
Realised foreign exchange gains on
the settlement of foreign loans and forward exchange contracts |
|
13.6 |
|
0.9 |
Financial income |
|
19.0 |
|
81.6 |
Gross interest on senior secured
second lien notes, bank loans and overdrafts |
|
(45.3) |
|
(51.5) |
Other debt finance costs, including
BEE loan interest, facility fees and IFRS 16 charges |
|
(2.3) |
|
(8.4) |
Unwinding of present value
adjustment for rehabilitation costs |
|
(5.4) |
|
(4.6) |
Net unrealised foreign exchange
losses1 |
|
(36.5) |
|
— |
Acceleration of unamortised bank
facility and Notes costs |
|
(1.6) |
|
(2.7) |
Realised foreign exchange losses on
the settlement of foreign loans and forward exchange contracts |
|
(1.0) |
|
(7.0) |
Financial expense |
|
(92.1) |
|
(74.2) |
Loss on substantial modification of
Notes2 |
|
— |
|
(7.7) |
Gain on extinguishment of Notes –
debt for equity conversion2 |
|
— |
|
221.0 |
Net gain on extinguishment of
Notes |
|
— |
|
213.3 |
Net financial (expense) /
income |
|
(73.1) |
|
220.7 |
1 .The Group predominantly enters into hedge
contracts where the risk being hedged is the volatility in the
South African Rand, Pound Sterling and US Dollar exchange rates
affecting the proceeds in South African Rand of the Group’s US
Dollar denominated diamond tenders. The fair value of the Group’s
hedges as at the end of the Period are based on Level 2
mark-to-market valuations performed by the counterparty financial
institutions. The contracts are all short dated in nature and
mature within the next 12 months. A weakening of the South African
Rand against the US Dollar from ZAR14.27 (30 June
2021) to ZAR16.27
(30 June 2022) resulted in an
unrealised loss of US$36.5 million
(30 June 2021: US$77.1 million unrealised gain) comprising a
unrealised gain on foreign exchange contracts held at Year end of
US$0.7 million (30 June 2021: US$12.4
million unrealised gain) and losses on inter-group foreign
denominated loans of US$37.2 million
(30 June 2021: US$64.7 million unrealised gain); and a net
realised foreign exchange gain of US$12.6
million (30 June 2021:
US$6.1 million realised loss) in
respect of foreign exchange contracts closed during the Year is
included in the net finance and expense amount.
2 The loss on substantial modification and gain on
extinguishment of Notes in FY2021 arose from the Debt Restructuring
completed by the Group on 10 March
2021.
7. PROPERTY, PLANT
AND EQUIPMENT
The net movement in property, plant and equipment for the Period
is a decrease of US$63.6 million
(30 June 2021: US$21.0 million increase). This is primarily as a
result of:
- the movement in the US$/ZAR foreign exchange rate resulting in
a foreign exchange decrease on Rand based assets of US$83.4 million (30 June
2021: US$136.8 million
increase);
- an increase in property, plant and equipment from capital
expenditure of US$52.2 million
(30 June 2021: US$23.8 million),
- the transfer of the Williamson assets from non-current assets
held for sale of US$31.2 million, net
of IFRS 5 adjustment (30 June 2021:
US$31.3 million transfer to
non-current assets held for sale);
- an increase in the rehabilitation asset of US$nil (30 June 2021: US$6.4
million (due to the Cullinan Mine’s estimated period to
decommissioning reducing from 45 years to 25 years reflecting
updated scoping studies for future development outside of its
current approved mine plan));
- a reversal of IFRS 5 adjustment in respect of the Williamson
assets of US$21.4 million
(30 June 2021: US$21.4 million impairment charge);
- depreciation of US$82.8 million
(30 June 2021: US$75.9 million);
- the impairment of the Koffiefontein assets of
US$0.3 million (30 June 2021: US$17.3
million (Finsch and Koffiefontein)); and
- assets of US$1.9 million
(30 June 2021: US$0.1 million) disposed of during the Year.
8. LOANS AND
BORROWINGS
US$ million |
|
30 June
2022 |
|
30 June
2021 |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Loans and borrowings – Senior
secured second lien notes |
|
353.9 |
|
327.3 |
Loans and borrowings – Senior
secured lender debt facilities |
|
— |
|
72.7 |
|
|
353.9 |
|
400.0 |
Current liabilities |
|
|
|
|
Loans and borrowings – Senior
secured second lien notes |
|
12.3 |
|
— |
Loans and borrowings – senior
secured lender debt facilities |
|
— |
|
30.3 |
|
|
12.3 |
|
30.3 |
Total loans and borrowings - bank
facilities |
|
366.2 |
|
430.3 |
a) US$336.7
million Senior Secured Second Lien Notes
As part of the Debt Restructuring, a wholly owned subsidiary of
the Company, Petra Diamonds US$ Treasury Plc, issued debt
securities consisting of US$336.7
million five-year senior secured second lien loan notes
(“Notes”), with a maturity date of 8 March
2026. The Notes are guaranteed by the Company and by the
Group’s material subsidiaries and are secured on a second lien
basis on the assets of the Group’s material subsidiaries. The Notes
carry a coupon from:
- 9 March 2021 to 31 December 2022 of 10.50% per annum, which is
capitalised to the outstanding principal amount semi-annually in
arrears on 31 December and 30 June of each year;
- 1 January 2023 to 30 June 2023 of 10.50% per annum on 37.7778% of
the aggregate principal amount outstanding, which is capitalised to
the outstanding principal amount semi-annually in arrears on 31
December and 30 June of each year and 9.75% per annum on 62.2222%
of the aggregate principal amount outstanding which is payable in
cash semi-annually in arrears on 31 December and 30 June of each
year;
- 1 July 2023 to 31 December
2025 of 9.75% per annum on the aggregate principal amount
outstanding which is payable in cash semi-annually in arrears on 31
December and 30 June of each year; and
- 1 January 2026 to 8 March 2026 (final coupon payment) of 9.75% per
annum on the aggregate principal amount outstanding which is
payable in cash
The costs associated with issuing the Notes of US$20.7 million have been capitalised against the
principal amount and US$15.2 million
remains unamortised as at year end (30 June
2021: US$19.4 million).
Interest of US$50.3 million
(30 June 2021: US$11.1 million) had been accrued as at
30 June 2022.
Further details about the Notes (including security) have been
included in the Group’s FY 2022 Annual Report.
b) Senior Secured Lender Debt
Facilities
During June 2022, the Group
restructured its existing banking facilities providing for more
favourable terms than the Group’s current first lien facilities and
resulting in Absa Corporate and Investment Banking (“Absa”)
becoming the Group’s banking partner under the new banking
facilities.
A new Revolving Credit Facility (“RCF”) with Absa replaces the
existing RCF and term lending arrangements with the previous South
African lender syndicate comprising Absa, Nedbank, RMB and
NinetyOne. The new terms include, inter alia:
- improved structure with a single ZAR1
billion RCF replacing the existing amortising term loan of
ZAR1.2 billion and the ZAR408.8 million RCF;
- more appropriate covenant package resulting in improved
headroom and flexibility on the balance sheet;
- extended tenure for the RCF with a maturity date of
December 2025 and a more usual bullet
payment at maturity; and
- reduced financing costs with improved margin and commitment
fees. The costs associated with restructuring of the banking
facilities of US$0.5 million has been
expensed in the Consolidated Income Statement under net finance
charges.
The revised terms under the RCF are:
- maturity date December 2025 with
a 60 day buffer between the redemption of the Notes and the
maturity of the RCF;
- to maintain a Net Debt : EBITDA ratio tested
semi-annually on a rolling 12-month basis;
- to maintain an Interest Cover Ratio tested semi-annually on a
rolling 12-month basis, which if breached will give rise to an
event of default under the new bank facilities; and
- interest rate of SA JIBAR + 4.15% per annum (with the margin to
be reconsidered annually based on Petra’s credit metrics with a
view of further optimising the margin to be achieved).
The Group's debt and hedging facilities are detailed in the
table below:
Senior Lender Debt
Facilities |
|
2022 |
|
2021 |
|
|
Facility
amount |
|
Facility amount |
|
|
|
|
|
ZAR Debt Facilities: |
|
|
|
|
ZAR Lenders RCF |
|
ZAR1.0
billion |
|
ZAR560 million |
ZAR Lenders Term loan |
|
ZAR nil |
|
ZAR1.2 billion |
Absa/RMB – FX Hedging
facilities |
|
ZAR300
million |
|
ZAR150 million |
|
|
|
|
|
The terms and conditions of the Group facilities are detailed in
the Group’s FY 2022 Annual Report.
The facilities are secured on the Group’s interests in the
Cullinan, Finsch and Koffiefontein Mines.
As at date of this report, the RCF was undrawn and ZAR1.0 billion (US$61.5
million) remained available for drawdown. On 24 January 2022, the Company paid ZAR404.6 million (US$24.9
million) (capital plus interest) to settle the old RCF and
on 18 March 2022 the Company paid
ZAR893.2 million (US$54.9 million) (capital plus interest to settle
the Term Loan.
Covenant ratios
As part of the revised RCF facility entered into with ABSA in
FY2022, the Company is required:
- to maintain a Net Debt : EBITDA ratio tested
semi-annually on a rolling 12-month basis; and
- to maintain an Interest Cover Ratio tested semi-annually on a
rolling 12-month basis and
- to maintain minimum 12 month forward looking liquidity
requirement that consolidated cash and cash equivalents (excluding
diamond debtors) shall not fall below US$20.0 million.
The Company’s new covenant levels for the respective measurement
periods are outlined below:
|
FY22
H2 |
FY23
H1 |
FY23
H2 |
FY24
H1 |
FY24
H2 |
FY25
H1 |
FY25
H2 |
FY26
H1 |
Consolidated net debt
: EBITDA Leverage ratio (maximum) |
4.00 |
4.00 |
3.50 |
3.50 |
3.25 |
3.25 |
3.00 |
3.00 |
Interest Cover Ratio (minimum) |
1.85 |
1.85 |
2.50 |
2.50 |
2.75 |
2.75 |
3.00 |
3.00 |
Refer to the Financial Review for further commentary regarding
the covenants.
c) BEE Partner debt facilities
The BEE Partner debt facilities have been restructured and
formed part of the Term Loan in FY2021.
9. COMMITMENTS
As at 30 June 2022, the Company
had committed to future capital expenditure totalling US$49.5 million (30 June
2021: US$10.2 million), mainly
comprising the Cullinan Mine US$25.2
million (30 June 2021:
US$8.1 million), Finsch US$23.7 million (30 June
2021: US$1.5 million),
Koffiefontein US$0.3 million
(30 June 2021: US$0.6 million) and Williamson US$0.3 million (30 June
2021: US$nil).
10. RELATED PARTY
TRANSACTIONS
The Group’s related party BEE partners, Kago Diamonds (Pty) Ltd
(“Kago Diamonds”) and its gross interests in the mining operations
of the Group are disclosed in the table below.
|
|
|
Mine |
Partner
and respective interest
as at 30 June 2022 (%) |
Partner
and respective interest
as at 30 June 2021 (%) |
Cullinan |
Kago
Diamonds (14%) |
Kago
Diamonds (14%) |
Finsch |
Kago
Diamonds (14%) |
Kago
Diamonds (14%) |
Koffiefontein |
Kago
Diamonds (14%) |
Kago
Diamonds (14%) |
The Itumeleng Petra Diamonds Employee Trust (“IPDET”) holds a
12% interest in each of the Group’s South African operations, with
Petra’s commercial BEE Partners holding the remaining 14% interest
through their respective shareholdings in Kago Diamonds, in which
Petra has a 31.46% interest. The effective interest percentages
attributable to the remaining operations for the Group’s
shareholders is 78.4%.
The non-current loans receivable, non-current loans payable,
finance income and finance expense, due from and due to the related
party BEE partners and other related parties, including dividends
paid are disclosed in the table below:
US$ million |
|
2022 |
|
2021 |
|
|
|
|
|
Non-current receivable |
|
|
|
|
Kago Diamonds1 |
|
26.6 |
|
33.5 |
|
|
26.6 |
|
33.5 |
Current trade and other
receivables |
|
|
|
|
KEM JV2 |
|
3.7 |
|
9.7 |
Impairment
provision2 |
|
(2.0) |
|
(8.4) |
|
|
1.7 |
|
1.3 |
|
|
1 July 2021 -
30 June 2022 |
|
1 July 2020 -
30 June 2021 |
Finance income |
|
|
|
|
Kago Diamonds |
|
2.1 |
|
3.7 |
|
|
2.1 |
|
3.7 |
Finance expense |
|
|
|
|
Kago Diamonds |
|
— |
|
3.8 |
|
|
— |
|
3.8 |
Dividend paid |
|
|
|
|
Kago Diamonds3 |
|
1.3 |
|
— |
|
|
1.3 |
|
— |
|
|
|
|
|
¹ The movement in the Kago Diamonds receivable of US$6.9 million (30 June
2021: US$38.6 million) is
mainly attributable to amounts advanced to Kago Diamonds during the
Year totalling US$nil (30 June 2021:
US$3.8 million), a foreign exchange
decrease of US$4.1 million
(30 June 2021: US$15.4 million increase) and offset by the
reversal of prior year expected credit loss provision of US$nil
million (30 June 2021: US$4.2 million reversal) and the loan payable of
US$nil (30 June 2021: US$62.1 million) by the Group to Kago against the
Kago receivable.
2 Included in current trade and other receivables are
amounts advanced to KEM JV in respect of a working capital facility
and equipment finance facility of US$1.7
million (30 June 2021:
US$1.0 million) and the balance of
the KEM JV purchase consideration of US$nil (30 June 2021: US$0.3
million). During FY2022 the Group received payments of
US$2.5 million (FY 2021 US$nil) from
the KEM JV as settlement of the outstanding purchase consideration
this also resulted in an expected credit loss reversal of
US$2.9 million (FY2021: US$nil)
during the Year. The Group has applied the expected credit loss
impairment model to the KEM JV receivables, taking into account
various factors, and the expected credit loss was deemed to be
US$2.0 million (30 June 2021: US$8.4
million).
3 During the Year, Finsch declared and paid a
dividend out of profits generated in FY2021 to its shareholders.
The BEE partners received a total net dividend payment of
US$2.5 million comprising Kago
US$1.3 million and IPDET US$1.2 million.
Kago Diamonds is one of the BEE partners which obtained bank
financing from ABSA, RMB and Ninety-One (the “BEE Lenders”) to
acquire its interests in the Cullinan and Finsch MInes. The Group
had previously provided a guarantee to the BEE Lenders for
repayment of loans advanced to the Group’s BEE Partners, however
during FY2021 as part of the Debt Restructuring, the BEE Partner
debt facilities were restructured which formed part of the
Group’s Term Loan (refer to note 8 for further detail).
11. BEE LOANS RECEIVABLE
BEE Loans Receivable
The non-current BEE loans receivable represents those amounts
receivable from the Group’s BEE Partners (Kago Diamonds and the
IPDET) in respect of advances historically provided to the Group’s
BEE Partners to enable them to discharge interest and capital
commitments under the BEE Lender facilities, advances to the BEE
Partners to enable trickle payment distributions to both Kago
Diamonds shareholders and to the beneficiaries of the IPDET (Petra
Directors and Senior Managers do not qualify as beneficiaries under
the IPDET Trust Deed), and financing of their interests in the
Koffiefontein mine. In addition, US$42.0
million (30 June 2021:
US$45.4 million) has been recorded as
part of the gross receivable (before expected credit loss
provisions) in respect of amounts to be reimbursed to the Group in
respect of the guarantee under the BEE Lender facilities. Judgment
was required in determining the extent to which reimbursement is
applicable based on the terms of the agreements, South African
legislation and discussions with the BEE partners.
As a result of historical delays in the Cullinan Mine plant
ramp-up and the Finsch SLC ramp-up, the Group has historically and
through the Period elected to advance the BEE Partners’ funds using
Group treasury to enable the BEE Partners to service their interest
and capital commitments under the BEE Lender facilities (refer
below). These BEE receivables, including interest raised, will be
recoverable from the BEE Partners’ share of future cashflows from
the underlying mining operations.
As part of the in principle agreement reached during the Period
as part of the Restructuring, Petra will assume the BEE Lender
facility obligations under the terms outlined in note 8.
As part of the Debt Restructuring in FY2021, Petra has assumed
the BEE Lender facility obligations under the terms outlined in
notes 8 and 18.
For detail on expected credit loss provision and reversal
associated with the BEE loans receivable refer to note 2.
US$ million |
|
1 July 2021
-
30 June 2022 |
|
1 July 2020 -
30 June 2021 |
|
|
|
|
|
As at 1 July |
|
46.6 |
|
137.0 |
Foreign exchange movement on opening
balance |
|
(5.9) |
|
30.7 |
Discretionary advance – capital and
interest commitment (BEE Lender facility) |
|
— |
|
4.7 |
Discretionary advance –
distributions to beneficiaries |
|
— |
|
2.0 |
Interest receivable |
|
4.1 |
|
5.2 |
Reversal of BEE loans receivable –
expected credit loss provision |
|
— |
|
5.8 |
Repayment of loan from BEE
partner |
|
(0.2) |
|
— |
BEE payable restructuring – offset
against BEE receivable |
|
— |
|
(138.8) |
As at 30 June |
|
44.6 |
|
46.6 |
BEE loans payable
BEE loans payable represent those loans advanced by the BEE
partners to the Group to acquire their interest in the Cullinan and
Finsch Mines. Details of the movements are set out below.
US$ million |
|
1 July 2021
-
30 June 2022 |
|
1 July 2020 -
30 June 2021 |
|
|
|
|
|
As at 1 July |
|
— |
|
108.6 |
Foreign exchange movement on opening
balance |
|
— |
|
23.2 |
Interest payable |
|
— |
|
7.0 |
BEE payable restructuring – offset
against BEE receivable |
|
— |
|
(138.8) |
As at 30 June |
|
— |
|
— |
12. SHARES ISSUED
During the Year, the Company’s shareholders approved at the
FY2021 Annual General Meeting a 50 for 1 Share Consolidation.
Admission of the Company's New Ordinary Shares took place on
29 November 2021. As a result of the
Share Consolidation, the Company’s shares in issue comprise of
194,201,785 ordinary shares of 0.05
pence each.
In FY2021, as part of the Restructuring and subsequent to the
approval by shareholders at a special general meeting held on
13 January 2021, the Company allotted
8,844,657,929 Ordinary Shares to the Noteholders valued at
US$194.0 million (comprising Ordinary
shares valued at US$12.3 million and
share premium of US$181.7 million
before capitalised costs), based on the share price at 9 March 2021 (the date upon which all
implementation steps for the Debt Restructuring were met). The
allotment was pursuant to the Debt for Equity Conversion, announced
on 22 December 2020, which resulted
in the Noteholders holding 91% of the enlarged share capital of the
Company in the following proportions:
- 56.0% of the enlarged share
capital was issued to all Noteholders, including the New Money
Noteholders, pro rata to their holdings of existing Notes at the
close of the Restructuring (to the extent any Noteholder did not
take up their equity entitlement, such entitlement was allocated to
the remaining Noteholders who did not opt out of their equity
entitlement, on a pro rata basis); and
- 35.0% of the enlarged share
capital was issued to the New Money Noteholders only, pro rata to
their contribution of the New Money (to the extent any such
Noteholders did not take up their equity entitlement, such
entitlement was allocated to the remaining Noteholders who
contributed to the New Money and who did not opt out of their
equity entitlements, on a pro rata basis).
As a consequence of the Debt for Equity Conversion, 9% of the
Company’s enlarged share capital remains with the previous
shareholders (subject to dilution as a result of standard
management equity incentive arrangements). The costs associated
with the allotment of the new ordinary shares of US$12.3 million were capitalised against share
premium. For additional information regarding the Restructuring
refer to note 18.
13. EARNINGS PER SHARE
|
Total
2022
US$ |
Total
2021
US$ |
Numerator |
|
|
|
|
|
Profit for the Year |
68,995,537 |
187,021,893 |
|
|
|
Denominator |
|
|
|
Shares |
Shares |
Weighted average number of ordinary
shares used in basic EPS |
|
|
Brought forward |
9,710,089,272 |
865,431,343 |
Effect of shares issued during the
Year |
— |
2,721,433,209 |
Effect of 50 for 1 share
consolidation November 2021 |
(9,515,887,487) |
(3,515,127,261) |
Carried forward |
194,201,785 |
71,737,291 |
|
|
|
|
Shares |
Shares |
Dilutive effect of potential
ordinary shares |
— |
— |
Weighted average number of ordinary
shares in issue used in diluted EPS |
194,201,785 |
71,737,291 |
|
|
|
|
USc |
USc |
Basic profit per share – USc |
35.53 |
260.70 |
Diluted profit per share – USc |
35.53 |
260.70 |
The number of potentially dilutive ordinary shares, in respect
of employee share options, Executive Director and Senior Management
share award schemes is nil (30 June
2021: nil).
For the 12 months ending 30 June
2021, the basic and diluted profit per share have been
restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in
accordance with IAS 33 Earning per Share.
14. ADJUSTED EARNINGS PER SHARE (non-GAAP
measure)
In order to show earnings per share from operating activities on
a consistent basis, an adjusted earnings per share is presented
which excludes certain items as set out below. It is emphasised
that the adjusted earnings per share is a non-GAAP measure. The
Petra Board considers the adjusted earnings per share to better
reflect the underlying performance of the Group. The Company’s
definition of adjusted earnings per share may not be comparable to
other similarly titled measures reported by other companies.
|
Total
2022
US$ |
Total
2021
US$ |
Numerator |
|
|
|
|
|
Profit for the Year |
68,995,537 |
187,021,893 |
Net unrealised foreign exchange loss
/ (gain) |
34,851,735 |
(59,819,931) |
Present value discount – Williamson
VAT receivable |
4,076,760 |
(763,537) |
Profit on disposal of
subsidiary |
— |
(14,696,171) |
Impairment (reversal) / charge -
operations* |
(21,206,735) |
34,989,716 |
Impairment (reversal) / charge –
other receivables |
(2,544,704) |
439,236 |
Reversal of BEE loans receivable –
expected credit loss provision |
— |
(5,824,201) |
Taxation charge / (credit) on
unrealised foreign exchange (gain) / loss |
(1,618,908) |
17,228,580 |
Taxation credit on impairment
charge* |
— |
(3,308,166) |
Gain on extinguishment of Notes |
— |
(213,349,503) |
Transaction costs – acceleration of
unamortised costs on restructured loans and borrowings |
1,628,757 |
— |
Transaction costs (reversal) /
expense – Human rights settlement agreement and provisions for
unsettled and disputed tax claims |
(816,270) |
31, 110,891 |
Adjusted loss for the Year
attributable to parent |
83,366,172 |
(25,971,193) |
*Portion attributable to equity
shareholders of the Company |
|
|
|
|
|
Denominator |
|
|
|
Shares |
Shares |
Weighted average number of ordinary
shares used in basic EPS |
|
|
As at 1 July |
9,710,089,272 |
865,431,343 |
Effect of shares issued during the
Year |
— |
2,721,433,209 |
Effect of 50 for 1 share
consolidation November 2021 |
(9,515,887,487) |
(3,515,127,261) |
Carried forward |
194,201,785 |
71,737,291 |
|
|
|
|
Shares |
Shares |
Dilutive effect of potential
ordinary shares |
— |
— |
Weighted average number of ordinary
shares in issue used in diluted EPS |
194,201,785 |
71,737,291 |
|
|
|
|
USc |
USc |
Adjusted basic profit / (loss) per
share – USc |
42.93 |
(36.20) |
Adjusted diluted
profit / (loss) per share – USc |
42.93 |
(36.20) |
For the 12 months ending 30 June
2021, the basic and diluted profit per share have been
restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in
accordance with IAS 33 Earning per Share.
15. IMPAIRMENT CHARGE
The current market conditions in the global rough diamond
market, volatility of and variability in product mix are all
factors impacting the rough diamond prices achieved by Petra during
the Year, resulting in management taking a critical review of the
Group’s business models and operational assets. The carrying
amounts of the Group’s assets are reviewed at each reporting date
to determine whether there is any indication of impairment. If
there is any indication that an asset may be further impaired or an
impairment reversal may apply, its recoverable amount is estimated.
The recoverable amount is determined on a fair value less cost to
develop basis.
The operations of the Cullinan, Finsch, Koffiefontein and
Williamson Mines are held at
recoverable value as a result of FY2021 impairments. During the
Year under review, the Group reviewed the carrying value of its
investments, loan receivables and operational assets for indicators
of impairment. Following the assessment, no further impairment of
property, plant and equipment was considered appropriate for the
Cullinan, Finsch and Williamson
Mines, nor was any impairment reversal considered
appropriate in the current Year. The Group recognised an asset
level impairment charge of US$0.3
million being managements’ estimate of the decrease in the
value of the Koffiefontein assets. The Group also reversed a Group
level impairment charge relating to Williamson, previously
recognised under IFRS 5, of US$21.4
million as Williamson is no longer considered an asset held
for sale.
The Group recognised a consolidated income statement charge of
US$4.1 million comprising
management’s estimate of the recoverability of the Tanzania VAT
receivable, an impairment charge of US$0.3
million related to other receivables and an impairment
reversal of US$2.9 million of the KEM
JV receivable.
.
Impairment
(US$ million) |
Asset
class |
Carrying value pre
impairment |
Impairment |
Carrying value post
impairment |
|
|
|
|
|
Impairment operations: |
|
|
|
|
Cullinan |
Property, plant & equipment |
419.9 |
— |
419.9 |
Finsch |
Property, plant & equipment |
157.9 |
— |
157.9 |
Koffiefontein |
Property, plant & equipment |
1.1 |
(0.3) |
0.8 |
Williamson |
Property, plant & equipment |
29.3 |
21.4 |
50.7 |
Sub-total |
|
608.2 |
21.1 |
629.3 |
|
|
|
|
|
Impairment – non-financial
receivables: |
|
|
|
|
Other – current receivable |
KEM JV receivable (refer to note
10) |
(1.2) |
2.9 |
1.7 |
Other – current receivable |
Other receivables |
0.3 |
(0.3) |
— |
Other – non-current |
Tanzania VAT receivable (refer to
note 2) |
6.8 |
(4.1) |
2.7 |
Sub-total |
|
5.9 |
(1.5) |
4.4 |
Total |
|
614.1 |
19.6 |
633.7 |
30 June
2021
The operations of the Cullinan, Finsch and Koffiefontein Mines
were held at recoverable value as a result of FY 2020 impairments.
During FY 2021, the Group reviewed the carrying value of its
investments, loan receivables and operational assets for indicators
of impairment. Following the assessment, impairment of property,
plant and equipment was considered appropriate for Finsch and
Koffiefontein. No impairment was considered necessary for the
Cullinan Mine, nor was any impairment reversal considered
appropriate in the current year. The Group recognised a
consolidated income statement charge of US$17.3 million being the amount required to
write down management’s estimate of recoverable value of the Finsch
and Koffiefontein assets. Williamson was classified as Held for
Sale as at 30 June 2021 (refer to
note 17).
Impairment
(US$ million) |
Asset
class |
Carrying value pre
impairment |
Impairment |
Carrying value post
impairment |
|
|
|
|
|
Impairment
operations: |
|
|
|
|
Cullinan |
Property, plant &
equipment |
497.9 |
— |
497.9 |
Finsch |
Property, plant & equipment |
210.6 |
(15.1) |
195.5 |
Koffiefontein |
Property, plant & equipment |
3.3 |
(2.2) |
1.1 |
Williamson |
Property, plant & equipment
(refer note 17) |
52.7 |
(21.4) |
31.3 |
Sub-total |
|
764.5 |
(38.7) |
725.8 |
|
|
|
|
|
Impairment – non-financial
receivables: |
|
|
|
|
Other – current |
Tanzanian VAT receivable reversal
(refer note 2) |
— |
0.7 |
0.7 |
Other – current |
Other receivables |
0.6 |
(0.4) |
0.2 |
Sub-total |
|
0.6 |
0.3 |
0.9 |
Total |
|
765.1 |
(38.4) |
726.7 |
Cullinan, Finsch, Koffiefontein and
Williamson impairment considerations and assumptions
The Group performs impairment testing on an annual basis of all
operations and when there are potential indicators of impairment.
The impairment testing performed resulted in impairments of the
Koffiefontein and Williamson assets. The key assumptions used in
determining the recoverable value calculations, determined on fair
value less cost to develop basis, are listed in the table
below:
Group assumptions for 30 June 2022 and 30 June
2021:
Key assumptions |
Explanation |
Current mine plan and
recoverable value of reserves and resources |
Economically recoverable reserves and resources are based on
management’s expectations based on the availability of reserves and
resources at mine sites and technical studies undertaken in house
and by third party specialists.
The end of life of mine based on current mine plans for the
operations are as follows:
Cullinan Mine: FY 2031 (FY 2021: FY 2031)
Finsch: FY 2030 (FY 2021: FY 2030)
Koffiefontein: FY 2025 ( (FY 2021: FY 2023)
Williamson: FY 2030
Resources remaining after the current mine plans have not been
included in impairment testing for the operations. |
Current mine plan
reserves and resources |
Cullinan Mine: Current
mine plan over the next nine years; total resource processed 36.4
Mt (FY 2021: Current mine plan over the next nine years; total
resource processed 38.6 Mt). |
|
Finsch: Current mine
plan over the next eight years; total resource processed 23.2 Mt
(FY 2021: Current mine plan over the next nine years; total
resource processed 26.8 Mt). |
|
Koffiefontein: Current
mine plan over the next three years; total resource processed 1.9
Mt (FY 2021: Current mine plan over the next three years; total
resource processed 2.2 Mt). |
|
Williamson: Current
mine plan over the next eight years, total resource processed 43.3
Mt (FY2021: Williamson was on care and maintenance). |
Current mine plans –
capital expenditure |
Management has
estimated the timing and quantum of the capital expenditure based
on the Group’s current mine plans for each operation. There is no
inclusion of capital expenditure to enhance the asset beyond
exploitation of the current mine plan orebody. |
Residual Value |
Cullinan
Mine: Management included a residual value of property, plant and
equipment to be used beyond the current mine plan, given the
significant resource base estimated to be available at the end of
the current mine plan.
No residual values were included in the impairment assessments of
the other mining operations. |
Diamond prices |
The
diamond prices used in the impairment test have been set with
reference to recently achieved pricing and market trends, and
long-term diamond price escalators are informed by industry views
of long-term market supply/demand fundamentals. Given the current
market uncertainty, the assessment of short-term diamond prices and
the rate and extent of pricing recovery, together with the
longer-term pricing escalators, represented a critical
judgement
The 30 June 2022 impairment testing models starting price
assumptions have been adjusted to reflect the improved pricing
achieved during the Year when compared to the 30 June 2021
impairment models. Diamond prices (excluding Exceptional Stones)
have been assumed to remain unchanged during FY2023, then increase
by 3.9% from FY2024 onwards. The long-term models incorporate
normalised diamond price escalation of 1.9% above a long-term US
inflation rate of 2.0% per annum from FY 2024 to FY 2030. Estimates
for the contribution of Exceptional Diamonds sold for more than
US$5.0 million each are determined with reference to historical
trends. Based on the historical trends, management have increased
the contribution from Exceptional Stones at the Cullinan Mine from
US$25.0 million to US$35.0 million per annum.
The 30 June 2021 impairment testing models starting price
assumptions have been updated to reflect the improved pricing
achieved during the Year when compared to the 30 June 2020
impairment models. Diamond prices have been assumed to increase
from FY 2022 and then 4.4% from FY 2024, returning to pricing
levels achieved before the impact of COVID-19, representing an
increase of 25-30% from pricing achieved at the lowest point during
FY2020. The long-term models incorporate normalised diamond price
escalation of 1.9% above a long-term US inflation rate of 2.5% per
annum from FY 2025 to FY 2030. Estimates for the contribution of
Exceptional Diamonds sold for more than US$5.0 million each are
determined with reference to historical trends. |
Discount rate |
A ZAR discount rate of
13.0% (30 June 2021: 12.0%) was used for the South African
operations in and a USD discount rate of 14.00% (30 June 2021:
13.50%) for Williamson. Discount rates calculated based on a
nominal weighted average cost of capital including the effect of
factors such as market risk and country risk as at the Year end.
USD and ZAR discount rates are applied based on respective
functional currency of the cash generating unit. As Williamson was
held for sale as at 30 June 2021, the discount rate was applied to
cashflows expected from a disposal transaction. |
Cost inflation
rate |
Long-term inflation
rates of 3.5%–7.5% (30 June 2021: 3.5%–7.8%) above the long-term
US$ inflation rate were used for opex and capex escalators.
Management have taken into account the current short-term pressures
in the inflation environment and the impact on Opex and capex
costs, allowing for the inflation rate to normalise over the
longer-term. |
Exchange rates |
Exchange rates are
estimated based on an assessment of current market fundamentals and
long-term expectations. The US$/ZAR exchange rate range used for
all South African operations commenced at ZAR16.04 (30 June 2021:
ZAR14.50) for FY2023 reflecting the current volatility,
inflationary pressures and quantitative tightening by Central
banks, and ZAR16.24 for FY2024 and thereafter devaluing at
3.5% per annum. Given the volatility in the USD/ZAR exchange rate
and the current levels of economic uncertainty, the determination
of the exchange rate assumptions required significant
judgement. |
Valuation basis |
Discounted present
value of future cash flows. |
Williamson |
During the
Year, Williamson recommenced production. For impairment testing at
Williamson, management have used the above assumptions.
During FY2021, Williamson was classified as an asset held for sale,
for further detail refer to note 17. |
Sensitivity analysis
The impact of applying reasonable downside sensitivities under
the base case, on the key inputs based on management’s assumptions
at 30 June 2022 is noted below:
|
Additional Impairment charge |
(US$ million) |
Cullinan |
Finsch |
Koffiefontein |
Williamson |
Base case |
|
|
|
|
Increase in discount rate by 2% |
9.2 |
20.2 |
13.3 |
0.5 |
Reduction in pricing by 5% over
current mine plan |
44.1 |
44.5 |
36.4 |
19.8 |
Reduction in short-term production
by 10% |
10.9 |
12.6 |
32.4 |
n/a |
Increase in Opex by 5% |
22.0 |
23.3 |
32.4 |
24.3 |
Reduction in Exceptional Stones
contribution by US$10.0 million per annum |
41.4 |
n/a |
n/a |
n/a |
Strengthening of the ZAR from
US$/ZAR16.04 to US$/ZAR15.23 |
n/a |
0.6 |
32.4 |
n/a |
|
|
|
|
|
16.
DISPOSAL OF OPERATION (30 June
2021)
- Disposal of Botswana
(exploration)
During FY 2021, the Company disposed of its exploration assets
in Botswana via the sale of 100%
of its holding in Sekaka Diamonds Exploration (Pty) Limited
(“Sekaka”) to Botswana Diamonds PLC for a total consideration of
US$300,000 and a 5% royalty on future
diamond revenues should any of the prospects within the exploration
licences be brought into production. Refer to note 36 of FY2021
Annual Report for details.
The profit on disposal of subsidiary of US$14.7 million comprises a US$0.3 million disposal consideration, net profit
of US$1.3 million for the Period
1 July 2020 to the 30 November 2020 disposal date, and the recycling
of the foreign currency translation reserve of US$13.3 million, offset by a net asset disposal
amount of US$0.2 million.
17.
WILLIAMSON
- Framework Agreement
On 13 December 2021, the Company
signed an agreement in principle with the Government of
Tanzania relating to the
Williamson operations. Williamson resumed operations and sales
during the Year, having been on care and maintenance since
April 2020.
The Framework Agreement provides for a capital restructuring of
the Williamson Diamonds Limited (“WDL”), the entity that owns the
Williamson Mine, including the 16% free carried interest that the
Government of Tanzania is entitled
to receive in WDL and its shareholder loans under Section 10 of the
Tanzanian Mining Act, 2017 and Regulation 10 of the Tanzanian
Mining (State Participation) Regulations, 2020. The capital
restructuring will include:
- a WDL share issue with the effect of reducing Petra's indirect
shareholding from 75% to 63% and consequently increasing the
Government of Tanzania's
shareholding from 25% to 37%;
- a contribution to the Government of Tanzania of 16% of the principal outstanding
value of the Group’s shareholder loans payable by WDL, with the
remaining 84% of such principal outstanding loans continuing to be
owed to the Group; and
- the transfer of the WDL shares held by the Group to another
member of the Petra Group (either Petra itself or a special purpose
subsidiary). Petra have registered Mwadui Mining Holdings Ltd, a
subsidiary registered in the United
Kingdom, for this purpose.
With respect to the reorganisation of the parties' legal
interests in WDL, the Framework Agreement also provides for an
overall 55:45 economic benefit sharing ratio between the Government
of Tanzania and Petra in relation
to future economic benefits from the Williamson Mine. This
arrangement is intended to capture the parties' entitlements as
shareholders as well as, with respect to the Government of
Tanzania, the revenue it collects
from WDL arising from taxes, royalties, duties, fees and other
fiscal levies (“Government Imposed Charges”). The Framework
Agreement also provides that WDL shall be entitled to off-set its
undisputed unpaid and overdue VAT receivables against future
Government Imposed Charges, whereby such Government Imposed Charges
will be off-set and treated as paid for the purposes of the
economic benefit sharing ratio.
The Framework Agreement provides that Petra and the Government
of Tanzania will provide financial
assistance for the restart of operations at the Williamson Mine.
The Government of Tanzania has
agreed to allocate the sales proceeds of the 71,654.45 carat
diamond parcel from the Williamson Mine that was previously
confiscated and blocked for export. The original value of this
parcel was assessed in September 2017
at approximately US$15 million, as
previously disclosed, although Petra has not had the parcel
independently valued.
The Framework Agreement records an important US$20.0 million settlement between the
parties concerning long-standing historic disputes with the
Government of Tanzania. In FY2021,
as at 30 June 2021 the Group raised a
provision of US$19.5 million
(adjusted for time-value of money) in respect of the aforementioned
settlement. This settlement payment shall be made in instalments,
with the first instalment of US$5.0
million to be paid when the Framework Agreement becomes
effective and upon receipt of proceeds by WDL from the sale of the
confiscated diamond parcel. The subsequent annual instalments
of the settlement amount are to be made annually at amounts as
determined by WDL’s board of directors.
The Framework Agreement is subject to a number of conditions,
including Tanzanian regulatory approvals and the consent of Petra’s
South African lender group, and is therefore not yet effective as
at 30 June 2022. Petra is entering
into the Framework Agreement with the Government of Tanzania in the latter's capacity principally
as a regulator and collector of taxes in Tanzania. However, the Government of
Tanzania is also a related party
to Petra for the purposes of the UK Listing Rules, due to the
Government’s shareholding in WDL. The Framework Agreement could not
become legally binding on the parties until approval was obtained
from Petra’s shareholders. On 9 February
2022, Petra received shareholder approval of the Framework
Agreement. Notwithstanding, the Government of Tanzania's right to a 16% free carried
interest under the Tanzanian Mining Act, 2017 is an entitlement as
a matter of Tanzanian law, and is not of itself ultimately subject
to any approval or condition in any respect. Accordingly, Petra
acknowledges that arrangements to reflect this will need to be
implemented regardless of the Framework Agreement becoming
effective.
Memorandum of Understanding with Caspian Limited (“MOU”)
On 15 December 2021, the Company
announced that it had signed a non-binding Memorandum of
Understanding (“MoU”) to sell 50% less one share of the entity that
holds the Group’s shareholding in Williamson Diamonds Limited
(“WDL”), along with a pro rata portion of shareholder loans owed by
WDL, to Caspian Limited or its nominee (“Caspian”) for a total
consideration of US$15.0 million.
Caspian is the long-term technical
services contractor at the Williamson Mine.
Upon completion of the transactions contemplated by the MoU and
the capital restructuring in the aforementioned Framework Agreement
becoming effective, Petra and Caspian will each indirectly hold a 31.5%
stake in WDL but Petra retains a controlling interest in
Williamson.
Caspian’s purchase will be funded through the settlement of
US$11.1 million of past technical
services payments owed by WDL to Caspian, including services rendered during
the recent restart of operations following the care and maintenance
period, with the remaining amount being funded by Caspian rendering US$3.9 million of technical services to WDL in
order to ramp-up operations at the Williamson Mine.
The sale of the 50% less 1 share stake in the entity that holds
Petra’s shares in WDL is subject to the parties obtaining all
necessary Governmental, regulatory and lender approvals, including
approvals from the Tanzanian Mining Commission, the Tanzanian Fair
Competition Commission and The Bank of Tanzania, and a binding ruling from the
Tanzania Revenue Authority on the tax treatment of the
transaction. The parties are seeking to obtain such approvals
by the end of Q1 FY 2023.
As at 30 June 2021, the criteria
for classification as Asset Held for sale was met. Refer to (b)
below for FY2021 disclosures). Subsequently, the signing of the MOU
will result in Petra retaining its controlling interest in WDL and
will see Petra consolidating WDL’s operating and financial results,
with an appropriate recognition of non-controlling interest
attributable to both Caspian and
the Government of Tanzania. As
neither agreement mentioned above is effective as at 30 June 2022, WDL has been consolidated in the
same proportions as prior to its Held for Sale classification being
75% Petra and 25% Government of Tanzania.
- Asset Held for Sale (30 June
2021)
As at 30 June 2021, the assets and
liabilities of the Williamson operation (being Petra’s 75.0%
interest) were classified as held for sale in the Statement of
Financial Position at 30 June 2021,
in accordance with IFRS 5. The financial results of the Williamson
operation for FY2021 were disclosed in the Consolidated Income
Statement in Loss on discontinued operation. These have been
restated for the year ending 30 June
2022. The Williamson mining operation is a separate
operating segment for the purposes of the Group’s segmental
reporting.
- Net assets of Williamson:
US$ million |
Book value prior to
reclassification of as held for sale |
Impairment |
30 June
2021 |
Mining property, plant and
equipment |
52.7 |
(21.4)¹ |
31.3 |
Non-current trade and other
receivables |
0.7 |
— |
0.7 |
Trade and other receivables |
2.9 |
— |
2.9 |
Inventory |
15.5 |
— |
15.5 |
Cash and cash equivalents |
9.2 |
— |
9.2 |
Non-current assets held for
sale |
81.0 |
(21.4) |
59.6 |
|
|
|
|
Environmental liabilities,
provisions and other non-current trade and other payables |
(22.9) |
— |
(22.9) |
Trade and other payables and
provisions |
(10.6) |
— |
(10.6) |
Non-current liabilities
associated with non-current assets held for sale |
(33.5) |
— |
(33.5) |
Net assets |
47.5 |
(21.4) |
26.1 |
- Result of Williamson:
US$ million |
1 July 2020 – 30
June 2021 |
|
1 July 2019 – 30 June
2020 |
Revenue |
4.6 |
|
52.5 |
Cost of sales |
(13.8) |
|
(68.7) |
Gross loss |
(9.2) |
|
(16.2) |
Impairment charge – operations |
— |
|
(34.6) |
Impairment reversal / (charge) -
other receivables |
0.7 |
|
(6.8) |
Provisions for unsettled and
disputed tax claims |
(19.5) |
|
— |
Financial income |
— |
|
0.6 |
Financial expense |
(2.7) |
|
(0.8) |
Loss before tax |
(30.7) |
|
(57.8) |
Income tax charge |
— |
|
(0.2) |
Loss after tax before impairment
charge |
(30.7) |
|
(58.0) |
Impairment charge1 |
(21.4) |
|
— |
Net loss for the Year |
(52.1) |
|
(58.0) |
|
|
|
|
Attributable to: |
|
|
|
- Equity holders of the parent
|
(52.1) |
|
(58.0) |
|
— |
|
— |
|
(52.1) |
|
(58.0) |
|
|
|
|
The US$21.4 million impairment
loss recorded on the Williamson assets represented the difference
between the assets measured at the lower of their carrying amount
and fair value less costs to sell considering the best available
information at the present time with reference to ongoing
discussions with a potential investor. The impairment charge of
US$21.4 million was recognised to
reduce assets of Williamson to equal the fair value less costs to
sell.
- Consolidated balance reconciliation - Williamson
(30 June 2022)
US$ million |
Consolidated
(excluding WDL)
30 June 2022 |
Williamson
30 June 2022 |
Consolidated
(including WDL)
30 June 2022 |
ASSETS
Non-current assets |
|
|
|
Property, plant and equipment |
582.5 |
50.7 |
633.2 |
Right-of-use assets |
1.6 |
20.3 |
21.9 |
BBE loans and receivables |
44.6 |
— |
44.6 |
Other receivables |
— |
2.7 |
2.7 |
Total non-current assets |
628.6 |
73.7 |
702.3 |
|
|
|
|
Current assets |
|
|
|
Trade and other receivables |
37.3 |
12.5 |
49.8 |
Inventories |
45.1 |
25.5 |
70.6 |
Cash and cash equivalents (including
restricted amounts) |
259.4 |
28.8 |
288.2 |
Total current assets |
341.8 |
66.8 |
408.6 |
Total assets |
970.4 |
140.5 |
1,110.9 |
EQUITY AND LIABILITIES |
|
|
|
Equity |
|
|
|
Share capital |
145.7 |
— |
145.7 |
Share premium account |
959.5 |
— |
959.5 |
Foreign currency translation
reserve |
(449.5) |
0.6 |
(448.9) |
Share-based payment reserve |
1.9 |
— |
1.9 |
Other reserves |
(0.8) |
— |
(0.8) |
Accumulated losses |
(248.2) |
64.6 |
(183.6) |
Attributable to equity holders of
the parent company |
108.6 |
65.2 |
473.8 |
Non-controlling interest |
4.7 |
— |
4.7 |
Total equity |
413.3 |
65.2 |
478.5 |
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Loans and borrowings |
353.9 |
— |
353.9 |
Lease liabilities |
(1.7) |
20.9 |
19.2 |
Provisions |
69.6 |
28.1 |
97.7 |
Deferred tax liabilities |
71.3 |
— |
71.3 |
Total non-current
liabilities |
493.2 |
49.0 |
542.1 |
Current liabilities |
|
|
|
Loans and borrowings |
12.3 |
— |
12.3 |
Lease liabilities |
0.4 |
2.8 |
3.2 |
Trade and other payables |
51.3 |
23.5 |
74.8 |
Total current
liabilities |
64.0 |
26.3 |
90.3 |
Total liabilities |
557.2 |
75.3 |
632.4 |
Total equity and
liabilities |
970.4 |
140.5 |
1,110.9 |
|
|
|
|
US$ million |
Consolidated (excluding WDL)
1 July 2021 –
30 June 2022 |
Williamson
1 July 2021 –
30 June 2022 |
Consolidated (including WDL)
1 July 2021 –
30 June 2022 |
Revenue |
509.3 |
75.9 |
585.2 |
Mining and processing
costs |
(339.3) |
(52.2) |
(391.5) |
Other direct
income |
(0.9) |
0.1 |
(0.8) |
Corporate expenditure
including settlement costs |
(14.1) |
— |
(14.1) |
Other corporate
income |
0.6 |
— |
0.6 |
Expenditure for
unsettled and disputed tax
claims |
— |
— |
— |
Impairment (charge) /
reversal of non-financial assets |
(0.3) |
21.4 |
21.1 |
Impairment (charge) /
reversal other receivables |
2.6 |
(4.1) |
(1.5) |
Impairment of BEE
loans receivable – expected credit loss release |
— |
— |
— |
Total operating
costs |
(351.4) |
(34.8) |
(386.2) |
Profit on disposal
including associated impairment, net of tax |
— |
— |
— |
Financial income |
17.5 |
1.5 |
19.0 |
Financial expense |
(90.6) |
(1.5) |
(92.1) |
Profit before
tax |
84.8 |
41.1 |
125.9 |
Income tax charge |
(37.8) |
— |
(37.8) |
Profit for the
Period |
47.0 |
41.1 |
88.1 |
|
|
|
|
Attributable to: |
|
|
|
Equity holders of the
parent |
|
|
69.0 |
Non-controlling
interest |
|
|
19.1 |
|
|
|
88.1 |
18.
EVENTS AFTER
THE REPORTING PERIOD
Petra has announced its intention to reduce its gross debt
through a tender offer to bondholders to purchase up to
US$150 million of the Senior Secured
Second Lien Notes due in 2026 in line with its stated intent to
further optimise its capital structure through a reduction of gross
debt.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
- the preliminary financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union, and give a true and fair view of the
assets, liabilities, financial position and profit of the Group for
the Year;
- the preliminary management report for the Year includes a fair
review of the information required by the FCA’s Disclosure and
Transparency Rules (DTR 4.1.8 R and 4.1.9 R).
By order of the Board
Richard
Duffy
Chief Executive
Officer
13 September 2022
[1] Petra classifies “Exceptional Stones” as rough diamonds
which sell for US$5 million or more
each
[2] Like-for-like refers to the change in realised prices
between tenders and excludes revenue from all single stones and
Exceptional Stones, while normalising for the product mix
impact